Is this the final failure of capitalism? - Tilted Forum Project Discussion Community

Strange Famous · 12-31-2008, 01:09 PM

Ok... so the root of the current crisis is an asset bubble that burst (in housing): but is this more than just the usual violence of the invisible hands of Adam Smith? I can only speak for the UK, but there was a weekend when it was touch and go if 3 of the 4 main banks would be able to open on Monday morning before the govt poured in billions of taxpayers money.

Normal people probably mostly dont understand hedging and securities and so on... but they do see bankers rolling in million pound salaries and then getting bailed out. How much more indignity can the people be subjected to, how much more barefaced robbery - before we start to ask the question: humankind as a collective is capable of producing a set amount of resource, and why should it not be shared out equally, rather than be plundered by robber barons and pirates who are bailed out with tax money if they fail? (will we be called cynics if note that most members of govt retire into non exec board membership of big companies)

Each depressions, each shock, each crash is worse than the last... how many more before the people challenge the lies of the elite that "there is only one way"?

roachboy · 12-31-2008, 01:54 PM

probably not.
diamat isn't terribly helpful in sussing out what's happening in real time---the correlate of the schema is that at a certain point the proletariat will recognize it's objective interests and will act as a class to push this cycle of crisis in a revolutionary direction---but that cannot account for the transformation in both material and political conditions of working folk. i could go on and on...

what i think we're moving through is a significant rearrangement of the capitalist game though. it seems like most folk who a year ago were neoliberals are now more or less talking a social-democrat game, with varying degrees of coherence--with the americans bouncing along at the rear of the coherence train. the leading symptom of that is the fracturing of the hegemony of neoliberal discourse as the lingua franca of the dominant media's collective way of talking about the world. it hasn't disappeared, but it's self-evidently irrelevant. it's generating a cognitive dissonance amongst conservatives that you can almost hear buzzing in their skulls when you pass them on the street. but the immediate future is, as it always is really, open-ended.

what i think is going to happen is a political reconfiguration of the existing transnational order. while i think the principal loser in it will be the united states, it isn't obvious yet what shape that'll take or, by extension, what it will mean. in terms of the domestic ideological situation in the states, so far as i can talk about something that big, i think we are in stasis, in a strange interzone, adrift and waiting for the bush people to fuck off into a richly deserved oblivion (if there were any sense of justice in the world, their pathway to oblivion would be tracked by trials for war crimes)---but this is obviously not an unambiguous situation. look at gaza if you doubt this--look at what the americans are and (mostly) are not doing. it's obscene. the interzone is one of waiting for obama, and the reasons the dominant ideological apparatus if focused that way is that it maintains a veneer of legitimacy for the existing order.

my more revolution-oriented side sees possibilities in the next phase of things--if for example the lingua franca of the dominant ideology shifts toward a more social-democratic frame, that opens space to it's left that has been entirely foreclosed as the us has passed through the past 7 year of fascism-lite. and historically, it is the periods after the crises of capitalism that are the most volatile from a revolutionary viewpoint, particularly if the crisis unfolds across a phase of weakness for the left--and this is beyond weakness---this is atomization.

what cannot happen is a simple reversion to either the theoretical frameworks of modes of thinking political action from the old left tradition. i'd be happy to talk about this, but won't get started on it now. let's see how the thread unfolds.

ASU2003 · 12-31-2008, 03:22 PM

I think we should take a hard look at trading certain 'commodities' that should have regulated pricing instead of going to the person with the most money. There may be shortages, but you won't see the rich investors being able to make money off the basic needs of the population.

The question I think you should ask is if it is the end of unfair globalization? There was only so long that we could continue to export the basic jobs overseas before you get a large amount of people not working (and not counted in unemployment numbers), and don't have the money to buy up houses and cars among other things. While the other countries economies start improving and they are able to buy oil and raw materials to buy products made by their own factories.

But there are certain industries that should have some more government oversight and be somewhat regulated and taxed correctly. It will be interesting to see what kind of changes happen in the next few years.

aceventura3 · 01-01-2009, 11:32 AM

Quote:

Originally Posted by Strange Famous

Ok... so the root of the current crisis is an asset bubble that burst (in housing): but is this more than just the usual violence of the invisible hands of Adam Smith? I can only speak for the UK, but there was a weekend when it was touch and go if 3 of the 4 main banks would be able to open on Monday morning before the govt poured in billions of taxpayers money.

I don't agree that there was an asset value bubble burst at the root of the current crisis. In the US housing market what we had was speculative building/development in a few areas of the country (granted big areas, but generally limited), if we adjust national data taking out places like South Florida, Nevada, Southern California, Arizona most US real estate value is still relatively high on a historical basis adjusted for inflation. I would also argue that speculative value is illusion and that when speculative value goes away and you are left with real intrinsic or economic value that the change was needed and that rationally looking at intrinsic value we may find there was no real decline. The greater fool theory holds that the greatest (or the last) fool is the one who gets burned and that this is more a commentary on the foolish than the market.

Then there is the issue of liquidity. currently due to over building and limited access to new credit we have about an 11 month inventory of houses on the market. Until this inventory shrinks it is going to be difficult to sell a home anywhere in this country. The banking crisis is in part due to leverage that causes any drop in housing prices to be magnified many times over in the accounting records of banks. With pressure on reserves and to meet reserve requirements some banks ran into a shortage of cash which caused them to either need to sell assets at distressed prices or to stop lending. Reserve requirements are a regulatory issue and has little to do with fundamental economic strength. Regulators could assign a reserve requirement of 10% on banks or they could lower it to 5%, or make it 15%, given the smae bank with the same records, and given those three reserve requirements the bank could face going out of business or being able to aggressively loan new funds to customers. I would argue our current plight is not a failure of capitalism but a failure of centralized banking controls.

filtherton · 01-01-2009, 01:28 PM

At the very least, we ought to retire the myth of rational self interest.

Capitalism will never die in the US: it is our state religion. Like all religions, its failure can be used by the crafty to self validate. Notice the folk who blame the current unpleasantness on TOO MUCH regulation. Or the people who blame the failure of the big 3 automakers on unions.

If only we had let the invisible hand do its thing, they lament.

The funny thing about an invisible hand: you can never tell when it's giving you the finger.

hunnychile · 01-01-2009, 02:16 PM

The funny thing about an invisible hand: you can never tell when it's giving you the finger.[/QUOTE]

The best quote I've seen that totally resembles the Bush Years in the USA.
HA! Now what?

Suave · 01-01-2009, 06:56 PM

I don't think it's a failure of capitalism so much as a failure of the current neocolonial brand of capitalism in place. We're operating on an economic system that, on the macro scale, literally makes no sense. Creating money from debt is as logical as killing people in the name of increasing the population. This may not be the final straw, but I'm of the belief that, until we alter our economic system so that money represents value and not debt, we will be on the road to a royal ass-kicking of some sort.

The_Dunedan · 01-01-2009, 07:16 PM

Quote:

Creating money from debt is as logical as killing people in the name of increasing the population. This may not be the final straw, but I'm of the belief that, until we alter our economic system so that money represents value and not debt, we will be on the road to a royal ass-kicking of some sort.

Said asskicking is now underway. Fiat money, at least in the US, is beginning to fall apart in the usual way...only this time it's got the potential to take the whole bloody world down with it. Only time will tell if this is an accidental or controlled implosion, but the effects will likely be the same in either case.

roachboy · 01-02-2009, 04:55 AM

interesting.

here's something i've never understood about the libertarian critiques of "fiat currency."
maybe you can help me out with it.
generally, such critiques are linked to a demand for a return to the gold standard.
how is the value of gold any more or less a matter of convention than is the value of paper?

best i can figure it, there's no particular difference at this level: rather the difference lay in the finiteness (in principle) of the stock of gold...

is that all there is to it?

aceventura3 · 01-02-2009, 08:06 AM

Quote:

Originally Posted by filtherton

... Notice the folk who blame the current unpleasantness on TOO MUCH regulation.

I somewhat fall into this category for a number of reasons. One being that the perception of a regulated market often gives people a false sense of security and results in them taking on too much risk.

Baraka_Guru · 01-02-2009, 08:45 AM

Quote:

Originally Posted by aceventura3

I somewhat fall into this category for a number of reasons. One being that the perception of a regulated market often gives people a false sense of security and results in them taking on too much risk.

One of the functions of market regulation is risk analysis and management. A failure to adequately regulate a market does not mean market regulation doesn't work. It needs to be fixed, is all.

The sooner we figure out how to adequately regulate things on a global level in a way that is compatible enough for it to work, the sooner we "fix" capitalism. There are too many people putting a lot of stake in the "good" things globalization has to offer while ignoring some of the more dangerous elements--the elements that go awry when left unwatched (let alone unmanaged).

dc_dux · 01-02-2009, 09:28 AM

Quote:

Originally Posted by aceventura3

I somewhat fall into this category for a number of reasons. One being that the perception of a regulated market often gives people a false sense of security and results in them taking on too much risk.

The "sense of security" is far less false with reasonable regulations that prevent or minimize:

unsafe working conditions and unethical treatment of workers
environmental degradation
unsafe products making their way into the marketplace
unsavory or corrupt business practices (like tearing down the wall between commercial and investment banking)

than without such regulations.

The "invisible hand" equates the bottom line with the public good...and we know from experience since the industrial revolution that that is not the case.

Particularly if free marketeers have their way with deregulation...while at the same time demanding tort reform, even further limiting the rights of the public to legal redress.
-----Added 2/1/2009 at 12 : 44 : 21-----

Talk to the Invisible Hand
by Max and the Marginalized:

Quote:

Invisible hand, invisible hand, a magic trick that I don't understand
Watching its fist contract and expand with every jaw it breaks open
I might be a cynic but I think you'll agree, I can't put my trust in a thing I can't see
Invisible hand, i bow down to thee cause I don't want mine to get broken

When the invisible hand of the marketplace plants a punch right on your face
All the fools who once embraced it will let it pull them right under
When the invisible eyes of oversight fall asleep in broad daylight
Just drop the shades and kill the lights and leave them soundly in slumber
So keep your head afloat, and talk to the invisible hand 'til it slits your throat

Invisible hand, invisible hand, tickling away at supply and demand
Sprinkling imbalance across the land and thumbing its nose at resistance
Scratching the backs of the dry cleaner set, until they start begging to buy off the debt
If that's self-correction, let's come correct, I can't stretch all that distance

When the invisible hand of the marketplace plants a punch right on your face
All the fools who once embraced it will let it pull them right under
When the invisible eyes of oversight fall asleep in broad daylight
Just drop the shades and kill the lights and leave them soundly in slumber
So keep your head afloat, and talk to the invisible hand 'til it slits your throat

When the invisible hand of the market share flips it's finger in the air
And turns around and pinkie swears that it never knew what was coming
Invisible targets are easy to miss when they scurry off with a slap on the wrist
So how many more 'til we tire of this
And resolve to burn them with something more than a gift and a reprimand
It's time that we had a talk with the invisible hand

Listen here: Talk to the Invisible Hand (number 58)

roachboy · 01-02-2009, 09:45 AM

paul krugman's column in the ny times this morning seems germaine to this latest turn in this thread:

Quote:

Bigger Than Bush
By PAUL KRUGMAN

As the new Democratic majority prepares to take power, Republicans have become, as Phil Gramm might put it, a party of whiners.

Some of the whining almost defies belief. Did Alberto Gonzales, the former attorney general, really say, “I consider myself a casualty, one of the many casualties of the war on terror”? Did Rush Limbaugh really suggest that the financial crisis was the result of a conspiracy, masterminded by that evil genius Chuck Schumer?

But most of the whining takes the form of claims that the Bush administration’s failure was simply a matter of bad luck — either the bad luck of President Bush himself, who just happened to have disasters happen on his watch, or the bad luck of the G.O.P., which just happened to send the wrong man to the White House.

The fault, however, lies not in Republicans’ stars but in themselves. Forty years ago the G.O.P. decided, in effect, to make itself the party of racial backlash. And everything that has happened in recent years, from the choice of Mr. Bush as the party’s champion, to the Bush administration’s pervasive incompetence, to the party’s shrinking base, is a consequence of that decision.

If the Bush administration became a byword for policy bungles, for government by the unqualified, well, it was just following the advice of leading conservative think tanks: after the 2000 election the Heritage Foundation specifically urged the new team to “make appointments based on loyalty first and expertise second.”

Contempt for expertise, in turn, rested on contempt for government in general. “Government is not the solution to our problem,” declared Ronald Reagan. “Government is the problem.” So why worry about governing well?

Where did this hostility to government come from? In 1981 Lee Atwater, the famed Republican political consultant, explained the evolution of the G.O.P.’s “Southern strategy,” which originally focused on opposition to the Voting Rights Act but eventually took a more coded form: “You’re getting so abstract now you’re talking about cutting taxes, and all these things you’re talking about are totally economic things and a byproduct of them is blacks get hurt worse than whites.” In other words, government is the problem because it takes your money and gives it to Those People.

Oh, and the racial element isn’t all that abstract, even now: Chip Saltsman, currently a candidate for the chairmanship of the Republican National Committee, sent committee members a CD including a song titled “Barack the Magic Negro” — and according to some reports, the controversy over his action has actually helped his chances.

So the reign of George W. Bush, the first true Southern Republican president since Reconstruction, was the culmination of a long process. And despite the claims of some on the right that Mr. Bush betrayed conservatism, the truth is that he faithfully carried out both his party’s divisive tactics — long before Sarah Palin, Mr. Bush declared that he visited his ranch to “stay in touch with real Americans” — and its governing philosophy.

That’s why the soon-to-be-gone administration’s failure is bigger than Mr. Bush himself: it represents the end of the line for a political strategy that dominated the scene for more than a generation.

The reality of this strategy’s collapse has not, I believe, fully sunk in with some observers. Thus, some commentators warning President-elect Barack Obama against bold action have held up Bill Clinton’s political failures in his first two years as a cautionary tale.

But America in 1993 was a very different country — not just a country that had yet to see what happens when conservatives control all three branches of government, but also a country in which Democratic control of Congress depended on the votes of Southern conservatives. Today, Republicans have taken away almost all those Southern votes — and lost the rest of the country. It was a grand ride for a while, but in the end the Southern strategy led the G.O.P. into a cul-de-sac.

Mr. Obama therefore has room to be bold. If Republicans try a 1993-style strategy of attacking him for promoting big government, they’ll learn two things: not only has the financial crisis discredited their economic theories, the racial subtext of anti-government rhetoric doesn’t play the way it used to.

Will the Republicans eventually stage a comeback? Yes, of course. But barring some huge missteps by Mr. Obama, that will not happen until they stop whining and look at what really went wrong. And when they do, they will discover that they need to get in touch with the real “real America,” a country that is more diverse, more tolerant, and more demanding of effective government than is dreamt of in their political philosophy.

http://www.nytimes.com/2009/01/02/op...02krugman.html

the comments are interesting to read through as well.

dc_dux · 01-02-2009, 09:50 AM

I had to laugh when I saw this:

Quote:

Republican Party officials say they will try next month to pass a resolution accusing President Bush and congressional Republican leaders of embracing "socialism," underscoring deep dissension within the party at the end of Mr. Bush's administration....

Washington Times - EXCLUSIVE: RNC draft rips Bush's bailouts

The RNC (which traditionally stays out of policy debates).taking on the Republicans in Congress in a cage match, leaving both of them bloodied with the Democrats smiling from the sidelines.

aceventura3 · 01-02-2009, 10:43 AM

Quote:

Originally Posted by Baraka_Guru

One of the functions of market regulation is risk analysis and management. A failure to adequately regulate a market does not mean market regulation doesn't work.

I don't argue that there should be no regulation. I do think there is an optimum level of regulation. So in my mind the debate centers around the question of is there too much or too little.

Quote:

The sooner we figure out how to adequately regulate things on a global level in a way that is compatible enough for it to work, the sooner we "fix" capitalism.

Capitalism is not broken and I think we do know how to regulate things. However, I think the perceptions of what regulations can and can not do are in question.

I should ask the question, but I doubt I would get a direct honest answer, so here is what I think. I think some (those always wanting more regulation) believe that regulations can eliminate risk, that they can stop greed, excessive profits, exploitation, fraud, crime, etc., regulations can not do all of this.

For example there are regulations regarding insider trading in publicly traded stocks. every once in awhile the SEC has a high profile case and get a conviction, however, given the number of stocks, the volume of transactions, the methods to transact trades, it is virtually impossible for any regulation to prevent insider trading will actually prevent insider trading, people profiting from it and protecting "innocent" victims. What do you think, at best will regulators uncover .001% of profits from insider trading activity? The result of this regulation is that it gives amateurs a false sense of security and they then fail to do their homework - hence they get burned. In my view we do need some controls on disclosures, etc., but to make insider trading illegal is kind of a joke. When trading stock people need to do their homework - that is the real answer. You say how could this ever work? Well for starters if the buyer asks the seller the right questions and then if the seller is dishonest that could be fraud. But the issue is the buyer asking the right questions.
-----Added 2/1/2009 at 01 : 49 : 19-----

Quote:

Originally Posted by dc_dux

The "sense of security" is far less false with reasonable regulations that prevent or minimize:

unsafe working conditions and unethical treatment of workers
environmental degradation
unsafe products making their way into the marketplace
unsavory or corrupt business practices (like tearing down the wall between commercial and investment banking)

than without such regulations.

I agree there are some regulations that are needed and have proven to be effective. I think on a whole OSHA regulations do more good than harm.

Some of your other points here are questionable because the point are vague. What is a "safe" product? What is an "unsavory" business practice? Is "unsavory" different from illegal? How do you eliminate "unsavoryness" through regulation?

dc_dux · 01-02-2009, 10:57 AM

Quote:

Originally Posted by aceventura3

Some of your other points here are questionable because the point are vague. What is a "safe" product? What is an "unsavory" business practice? Is "unsavory" different from illegal? How do you eliminate "unsavoryness" through regulation?

unsavory is an investment bank leverage 10 or 20 or 30 times over....a practice that was previously regulated.

safe products are ones that meet external (regulatory) standards for quality control.

aceventura3 · 01-02-2009, 10:57 AM

Quote:

Originally Posted by dc_dux

I had to laugh when I saw this:

The RNC (which traditionally stays out of policy debates).taking on the Republicans in Congress in a cage match, leaving both of them bloodied with the Democrats smiling from the sidelines.

Bush had a few high points, but fiscal policy was not one of them. And in the last few months he seems to be going along with and doing whatever Democrats in Congress want. There is clearly going to be a fight in the Republican party between real fiscal conservatives and moderates. There needs to be a winner. We need to clearly define what we stand for as a party. I think it is healthy. I would support the resolution.
-----Added 2/1/2009 at 01 : 58 : 48-----

Quote:

Originally Posted by dc_dux

unsavory is an investment bank leverage 10 or 20 or 30 times over....a practice that was previously regulated.

Is all leverage "unsavory"? Or is it just "unsavory" for investment banks?

dc_dux · 01-02-2009, 11:02 AM

Quote:

Originally Posted by aceventura3

Is all leverage "unsavory"? Or is it just "unsavory" for investment banks?

Call it something else, if you dont like "unsavory"....the fact remains, it was regulated until 2000.

Hell...call it "putting lipstick on a pig"....its still a pig.

aceventura3 · 01-02-2009, 11:06 AM

Quote:

Originally Posted by dc_dux

Call it something else, if you dont like "unsavory"....the fact remains, it was regulated until 2000.

Hell...call it "putting lipstick on a pig"....its still a pig.

I don't follow your logic.

I think if highly leveraged investment banks become insolvent they should go out of business. If they lied to investors about the amount of leverage they had, I consider that fraud.

dc_dux · 01-02-2009, 11:23 AM

Quote:

Originally Posted by aceventura3

I don't follow your logic.

I think if highly leveraged investment banks become insolvent they should go out of business. If they lied to investors about the amount of leverage they had, I consider that fraud.

ace....if you cant accept that the massive over-leveraging was a direct result of the deregulation of commercial and investment banking in 2000, I guess you cant follow the logic.

aceventura3 · 01-02-2009, 01:16 PM

Quote:

Originally Posted by dc_dux

ace....if you cant accept that the massive over-leveraging was a direct result of the deregulation of commercial and investment banking in 2000, I guess you cant follow the logic.

I question the premise that massive over-leveraging was a direct result of "deregulation" leading to market failures. Short of having no leverage, firms always have the risk of failure due to leverage (I know some will call what I just wrote tautology or stating something that need not be stated, so let's just say we already know I am guilty of it or whatever, I just think the point needed to be put on the table). In addition there are far more firms that did not fail due to leverage than those that have. The real issue is the decisions made or the judgment of those who employed leverage. The regulation governing the use or non-use of leverage is a false indicator of the cause of failure.

So based on my view, people who hold the view that the lack of regulation lead to market failure are going to attempt to fix the problem with a solution that is not going to be workable or with a solution that is not relevant to the issue.

I understand what I don't accept on this issue and I know why I don't accept it. I wonder if those who disagree with my position can say the same.

BadNick · 01-02-2009, 01:23 PM

Call it regulation if you want to use that word, I see "honest disclosure" being the most important component. If the brokers/investment houses were required to disclose the extent of their leveraging, then potential investors could weigh the risks and invest accordingly, or not, depends on how much you want to gamble for the potential return.

Stare At The Sun · 01-02-2009, 01:47 PM

Quote:

Originally Posted by BadNick

Call it regulation if you want to use that word, I see "honest disclosure" being the most important component. If the brokers/investment houses were required to disclose the extent of their leveraging, then potential investors could weigh the risks and invest accordingly, or not, depends on how much you want to gamble for the potential return.

This.

Capitalism is still, at its core the economic system that has given the most to the world, and will continue to. Capitalism encourages us to better ourselves by productive achievement, and that won't be lost in the US for a long time.

I hope the trend of "bail-outs" stops.

roachboy · 01-02-2009, 02:15 PM

there's nothing even unusual about mixed state/private economic sectors in a capitalist context. in fact, if you think about it, capitalism isn't a thing--it's a system of production and ownership, which are at the center of broader modes of social reproduction or control. what capitalism looks like in any given space is a function of the histories of that shape it, that it shapes, etc.

so there are many varieties of capitalism: in a sense there's nothing but versions of it.

this "definition" of capitalism as involving "free markets" is just another version. the collapse of moral categories into ways of thinking about this social system are nothing more than aspects of the histories of american-style capitalism(s) that are one of many contextual factors that shape where we've collectively landed in the states today.

if you say that state action in a market context is socialism, you're making a statement that's only valid within a particular set of political contexts. outside them, it's meaningless.

what's finished is neoliberalism--in this, krugman's right.
one of the many problems facing the states at the moment--and here more than most places i think--is that neoliberals are ideologically opposed to state action in the economy, so if they find themselves in a position such that reality forces them to act otherwie, they do not know what to do. it's outside their worldview and so can't help but be incoherent. which is, i think, what we're seeing.

folk should hope that obama is much more a social democrat than the retro-nature of us mass politics lets him say he is.

aceventura3 · 01-02-2009, 03:21 PM

Quote:

Originally Posted by BadNick

Call it regulation if you want to use that word, I see "honest disclosure" being the most important component. If the brokers/investment houses were required to disclose the extent of their leveraging, then potential investors could weigh the risks and invest accordingly, or not, depends on how much you want to gamble for the potential return.

I tend to agree. Honest disclosure is at the root of investors (or consumers) making informed decisions. Short of making honest disclosure a requirement, I think investors faced with a choice between honest disclosure and no honest disclosure will pick honest disclosure. So when there is an informed investor there is not even a need to make honest disclosure a "requirement" because those seeking investors will voluntarily provide honest disclosure to obtain investment. If "regulators" want to try and make the market idiot proof they can put in "requirements" all day long based on what an informed investor would look for - but at the end of the day no "requirement" will protect anyone from dishonesty or even incompetence. Caveat emptor - that is the best market regulator.

Suave · 01-02-2009, 03:34 PM

Quote:

Originally Posted by roachboy

interesting.

here's something i've never understood about the libertarian critiques of "fiat currency."
maybe you can help me out with it.
generally, such critiques are linked to a demand for a return to the gold standard.
how is the value of gold any more or less a matter of convention than is the value of paper?

best i can figure it, there's no particular difference at this level: rather the difference lay in the finiteness (in principle) of the stock of gold...

is that all there is to it?

That is the basic difference, yes. We're currently running a global economy that is based on some fictional concept of inifinite economic growth, which is impossible given our finite resources. It doesn't matter what we use as the standard, but whatever arbitrary value is assigned must be representative of our resources, and not what people owe each other. You know a system is screwed up when you think about the fact that it would completely crash if everyone paid off their debts.

So yes, primarily because gold is finite. Also because it was the initial standard so it is a familiar one, and gold has a very stable market value compared to other resources.

dc_dux · 01-02-2009, 04:22 PM

Quote:

Originally Posted by aceventura3

If "regulators" want to try and make the market idiot proof they can put in "requirements" all day long based on what an informed investor would look for - but at the end of the day no "requirement" will protect anyone from dishonesty or even incompetence. Caveat emptor - that is the best market regulator.

Regulation worked pretty well between 1929 and the Glass-Stengall Act.....until the deregulation of the S&Ls in the 80s and the deregulation of commercial and investment banking in 2000.

There has always been fraud, dishonest, greed... but regulatory oversight keeps it in check far greater than the "invisible hand" or caveat emptor..

ASU2003 · 01-02-2009, 04:48 PM

Regulations are the brakes that keep the train from going too fast and coming off the tracks. If housing had gone up 3-5% in the past 10 years, house prices would be at the same place that they are right now, yet we would feel a lot better about the outlook of this economy. It's true that it is harder to make money, and growth isn't as fast. But since anyone could have gotten a mortgage, and plenty of people got too many mortgages in order to make a quick buck or borrowed too much from their home's paper value it caused us to get into the mess we are in. Banks have grown too big and should have their size regulated. When IndyMac failed, it was just another bank. But if Chase or Bank of America failed, well there would be major problems.

It will be interesting to see in the new administration announces a comprensive economic plan and direction for the next 4 years when they take office.

pai mei · 01-14-2009, 03:23 AM

"Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable.The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and State will have to take the road which will eventually lead to communism."

Karl Marx, 1867

Yakk · 01-14-2009, 01:02 PM

Quote:

Originally Posted by Strange Famous

humankind as a collective is capable of producing a set amount of resource

I can generate a very very variable amount of resources, depending on my motivation.

Quote:

Each depressions, each shock, each crash is worse than the last... how many more before the people challenge the lies of the elite that "there is only one way"?

False. I am not aware of a shock that was greater than the great depression. And it is often argued that the 1870s depression was far worse than the 1930s depression.

Quote:

Originally Posted by Suave

You know a system is screwed up when you think about the fact that it would completely crash if everyone paid off their debts.

Think what it would mean if everyone paid off their debts.

It means nobody has any obligation to anyone to do any work. The demand for money is based off of people who really want to get money for ... well, eventually, to pay off their debts. On top of that, if nobody wants to borrow money, it means nobody can think of a means to take money and invest it to generate a profit using resources beyond what they already own.

Nobody that others think can replay debt wants to borrow money. Which means everyone that has the ability to repay already has all of the resources they desire. Only those who don't have the ability to repay want to borrow money. Everyone wants their resources enough that they aren't willing to lend them at a rate anyone is willing and able to to pay back...

If you don't have something that the farmer immediately wants for his food, what can you give the farmer? You can give that farmer an IOU, saying you'll repay the farmer later. Even better, you can find an IOU that many people are willing to repay, and give it to the farmer, giving the farmer lots of choice.

An IOU that many people are willing to repay is currency.

aceventura3 · 01-16-2009, 07:58 AM

Quote:

Originally Posted by dc_dux

Regulation worked pretty well between 1929 and the Glass-Stengall Act.....until the deregulation of the S&Ls in the 80s and the deregulation of commercial and investment banking in 2000.

What about the period before 1929? The banking system was working then with even less regulation than today. Perhaps the generic concept of "regulation" is meaningless. We should think in terms of value adding regulations, and regulations adding no value. This current form of liberal speak suggesting that banks and the financial sector are not regulated is either dishonest or uninformed. Yes, I said it again - unfortunately it is true.

Quote:

There has always been fraud, dishonest, greed... but regulatory oversight keeps it in check far greater than the "invisible hand" or caveat emptor..

I disagree. The best protection against dishonesty, greed, etc. is due diligence, doing your homework, being proactive, alert, cautious, etc. at the individual level. Even in highly regulated markets a person can be a victim and unfortunately the regulators may not be able to respond until after the damage has been done, but if one does their own due diligence one can avoid being a victim to begin with.

It is interesting how this illustrates a fundamental difference in the thinking of current liberals and real conservatives. And even Obama stated that government is the only solution to our current economic problems. Unbelievable.

guyy · 01-16-2009, 08:20 AM

Quote:

Originally Posted by aceventura3

What about the period before 1929?

Insull, the original Ponzi scheme, Florida real estate scams, the Crash itself...

Put it this way: there was a reason for all that regulation.

aceventura3 · 01-16-2009, 08:29 AM

Quote:

Originally Posted by guyy

Insull, the original Ponzi scheme, Florida real estate scams, the Crash itself...

Put it this way: there was a reason for all that regulation.

Greed.

Also, I think history clearly shows that regulators are reactive. They let an excess cause a problem, then they do something that they think solves the problem. Then the next excess causes a problem and the cycle continues. There were many smart people in 1929 that did not get burned just like today. So they want to protect those who get duped. The duped should take their lumps and move on.

Also, many would argue it was the government response to the crash in 1929 that actually caused the depression.

guyy · 01-16-2009, 09:43 AM

Quote:

Originally Posted by aceventura3

Greed.

Also, I think history clearly shows that regulators are reactive. They let an excess cause a problem, then they do something that they think solves the problem. Then the next excess causes a problem and the cycle continues.

[...]

Also, many would argue it was the government response to the crash in 1929 that actually caused the depression.

1. Under capitalism, greed is a constant. Capitalist ideology tells us it has always been so, and will always be so, and can only be so. You own it, Ace. Enjoy.

2. I would agree that regulation is reactive, and it seems you think that regulators should have been more proactive. No doubt. Considering that the current crash developed after the dismantling of the 1930s regulatory framework, i cannot agree that an excess of New Deal regulation led to the Crash of 2008.

3. Many of those "many" would argue that any gummint anything is a priori bad bad bad. They have the same knee-jerk response to every development. So does my cat. Meow.

Still others would point out that attempts to balance budgets after 1929 exacerbated the situation. That is happening right now.

aceventura3 · 01-16-2009, 10:09 AM

Quote:

Originally Posted by guyy

1. Under capitalism, greed is a constant. Capitalist ideology tells us it has always been so, and will always be so, and can only be so. You own it, Ace. Enjoy.

There is a difference between greed and doing what is in your own best interest. I disagree that greed is a constant, the constant is people doing what is in their best interest. Greed is always potentially present and when it comes to the surface bad things usually follow eventually.

Quote:

2. I would agree that regulation is reactive, and it seems you think that regulators should have been more proactive. No doubt. Considering that the current crash developed after the dismantling of the 1930s regulatory framework, i cannot agree that an excess of New Deal regulation led to the Crash of 2008.

I think regulators need to be more thoughtful, understand the delicate balance between excessive and reasonable regulation. they should understand the ever potential for unintended consequence and be prepared and willing to make adjustments.

Quote:

3. Many of those "many" would argue that any gummint anything is a priori bad bad bad. They have the same knee-jerk response to every development. So does my cat. Meow.

I think most thoughtful people, even those with libertarian tenancies, recognize a role for gummint.

roachboy · 01-16-2009, 10:17 AM

ace--in no. 2 it almost sounds like you're arguing for an explicit industrial policy from the state.
because without that, how would a regulator--or anyone else for that matter--be able to distinguish between types of consequences?

aceventura3 · 01-16-2009, 11:18 AM

Quote:

Originally Posted by roachboy

ace--in no. 2 it almost sounds like you're arguing for an explicit industrial policy from the state.
because without that, how would a regulator--or anyone else for that matter--be able to distinguish between types of consequences?

The first step would be to clearly define the intent of the proposed regulation. Then we can easily determine if the consequences are as intended. And I would say lawmakers have the obligation have clearly defining intent.

For example if the intent of regulating the number of hours a truck driver drives in a 24 hour period to xx number of hours is to reduce accidents on the road by 10%. We should be able to quantify the impact on accidents and also the impact on other things like the cost of good transported. If we find that with this regulation the frequency of accidents do in fact go down, but the severity goes up (perhaps because drivers are driving faster when actually on the road), the regulation should be revisited and compared to the original intent. In this case we find that the original intent is being accomplished but that fatal accidents have increased, perhaps another approach is in order rather than a more and more complicated patch work of regulations.

And perhaps unfortunately in the situation above what may really be happening is that people who have the ability to safely drive 18 hours in a 24 hour period are being dumbed down to those who can't.

Yakk · 01-16-2009, 02:38 PM

Ace, individual optimizing actions do not generate globally optimal results in a general free market.

That is because Nash equilibriums that are not global maxima exist in most cases.

The hope is that the system is set up so that Nash equilibriums exist close to the global maxima, so we can use each individual processing information and making decisions in their own best interest to generate a good approximation to the global maxima solution, far better than a central resource allocation could do.

The problem is knowing where the global maxima is challenging. On the other hand, it can be easier to see isolated Nash equilibrium failures and fix them without knowing what the global maximum solution is (ie, you see a situation where action X done by all parties would create efficiency, but action X done by any one party would result in the externalities being captured by other parties. That results in no party having an incentive to individually do action X. A regulation enforcing action X on all parties that costs less than the projected benefit is worth exploring, in order move the Nash equilibrium, and hopefully find a better hill to climb.)

Naturally, these experiments can be dangerous -- misestimation of cost of enforcement or return from the policy, or the possibility that the costs cause other more-ideal equilibriums to fall into worse states, can cause damage.

The idea of bank regulation is that having companies able to generate market-responsive liquidity, and who have internal incentive to evaluate the worth of people who want cash, is a useful thing for society. But the internal incentives don't line up perfectly -- banks have lots of short-term and medium-term incentives to "bet against the black swan" event. A bank that failed to bet against the black swan would see lower returns on their investments in a systematic way. It would fare better in a catastrophic downturn -- but the damage from that downturn wouldn't be limited to the banks who did bet against the black swan, and the 'cautious' banks would suffer a good chunk of the economic damage that the 'reckless' banks generated.

So the idea is that we allow banks to do term-inversion of investments on reasonably large scales in exchange for being conservative in their investment actions. The reserve requirements exist so that the bank can survive a black swan event without collapsing. (The damage caused by a bank collapse is not just limited to bank creditors, account holders, and investors -- due to the economic lubricating job of the bank, it creates far-flung damage that is external to agreements directly with the bank and bank counterparties.)

Anyhow, that is how I see it.

tisonlyi · 01-19-2009, 01:46 AM

Has this really gone to game theory? Really?

Game theory is still, somehow, fashionable, even though it has never worked in practise and almost all of its original proponents now accept its divorce from reality.

Rational actors acting exclusively in their own self-interest... Have never been part of society, will never be part of general society - aside from psychopaths and economists. Human beings, as social animals, will _always_ find ways to cooperate. Game theory is based on strict non-cooperation, hence game theory cannot be applied to anything but simplified situations (like the cold war standoff, to a degree) and absolutely cannot be applied to society.

Even Nash (mad as he is and always was) says this himself.

SpottedThinker · 01-20-2009, 10:44 AM

The conservatives who have been in power over the last few decades have made us believe that ANY government spending is socialism. That's just not true. This country was built through strong government programs and spending. The conservative myth that all private spending is wise and productive and public spending foolish and wasteful is what has gotten us into the economic mess we find ourselves in today. There is nothing socialist about having a government that serves the people - we live in a democracy, not a socialist state. It's the decline in national investments that has led us to a place where from 1989 to 2006, the highest-earning 10 percent of U.S. households collected over 90 percent of the nation’s income gains. Today the top 1 percent of American families receives 23 percent of all personal income, up from just 10 percent in 1979. Corporate executives earn 275 times as much as average workers, compared with 27 times in 1973 (these facts are taken from the downloadable book "Thinking Big", which I highly recommend: Thinking Big). If the market and hard work could have saved us - it would have already done so. So yes - the is the final failure of capitalism as it stands.

12-31-2008, 01:09 PM	#1 (permalink)
Strange Famous follower of the child's crusade?	Is this the final failure of capitalism? Ok... so the root of the current crisis is an asset bubble that burst (in housing): but is this more than just the usual violence of the invisible hands of Adam Smith? I can only speak for the UK, but there was a weekend when it was touch and go if 3 of the 4 main banks would be able to open on Monday morning before the govt poured in billions of taxpayers money. Normal people probably mostly dont understand hedging and securities and so on... but they do see bankers rolling in million pound salaries and then getting bailed out. How much more indignity can the people be subjected to, how much more barefaced robbery - before we start to ask the question: humankind as a collective is capable of producing a set amount of resource, and why should it not be shared out equally, rather than be plundered by robber barons and pirates who are bailed out with tax money if they fail? (will we be called cynics if note that most members of govt retire into non exec board membership of big companies) Each depressions, each shock, each crash is worse than the last... how many more before the people challenge the lies of the elite that "there is only one way"? __________________ "Do not tell lies, and do not do what you hate, for all things are plain in the sight of Heaven. For nothing hidden will not become manifest, and nothing covered will remain without being uncovered." The Gospel of Thomas

12-31-2008, 01:54 PM	#2 (permalink)
roachboy Super Moderator Location: essex ma	probably not. diamat isn't terribly helpful in sussing out what's happening in real time---the correlate of the schema is that at a certain point the proletariat will recognize it's objective interests and will act as a class to push this cycle of crisis in a revolutionary direction---but that cannot account for the transformation in both material and political conditions of working folk. i could go on and on... what i think we're moving through is a significant rearrangement of the capitalist game though. it seems like most folk who a year ago were neoliberals are now more or less talking a social-democrat game, with varying degrees of coherence--with the americans bouncing along at the rear of the coherence train. the leading symptom of that is the fracturing of the hegemony of neoliberal discourse as the lingua franca of the dominant media's collective way of talking about the world. it hasn't disappeared, but it's self-evidently irrelevant. it's generating a cognitive dissonance amongst conservatives that you can almost hear buzzing in their skulls when you pass them on the street. but the immediate future is, as it always is really, open-ended. what i think is going to happen is a political reconfiguration of the existing transnational order. while i think the principal loser in it will be the united states, it isn't obvious yet what shape that'll take or, by extension, what it will mean. in terms of the domestic ideological situation in the states, so far as i can talk about something that big, i think we are in stasis, in a strange interzone, adrift and waiting for the bush people to fuck off into a richly deserved oblivion (if there were any sense of justice in the world, their pathway to oblivion would be tracked by trials for war crimes)---but this is obviously not an unambiguous situation. look at gaza if you doubt this--look at what the americans are and (mostly) are not doing. it's obscene. the interzone is one of waiting for obama, and the reasons the dominant ideological apparatus if focused that way is that it maintains a veneer of legitimacy for the existing order. my more revolution-oriented side sees possibilities in the next phase of things--if for example the lingua franca of the dominant ideology shifts toward a more social-democratic frame, that opens space to it's left that has been entirely foreclosed as the us has passed through the past 7 year of fascism-lite. and historically, it is the periods after the crises of capitalism that are the most volatile from a revolutionary viewpoint, particularly if the crisis unfolds across a phase of weakness for the left--and this is beyond weakness---this is atomization. what cannot happen is a simple reversion to either the theoretical frameworks of modes of thinking political action from the old left tradition. i'd be happy to talk about this, but won't get started on it now. let's see how the thread unfolds. __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

01-01-2009, 01:28 PM	#5 (permalink)
filtherton Junkie Location: In the land of ice and snow.	At the very least, we ought to retire the myth of rational self interest. Capitalism will never die in the US: it is our state religion. Like all religions, its failure can be used by the crafty to self validate. Notice the folk who blame the current unpleasantness on TOO MUCH regulation. Or the people who blame the failure of the big 3 automakers on unions. If only we had let the invisible hand do its thing, they lament. The funny thing about an invisible hand: you can never tell when it's giving you the finger. Last edited by filtherton; 01-01-2009 at 01:32 PM..

01-01-2009, 02:16 PM	#6 (permalink)
hunnychile Alien Anthropologist Location: Between Boredom and Nirvana	The funny thing about an invisible hand: you can never tell when it's giving you the finger.[/QUOTE] The best quote I've seen that totally resembles the Bush Years in the USA. HA! Now what? __________________ "I need compassion, understanding and chocolate." - NJB

01-01-2009, 06:56 PM	#7 (permalink)
Suave Twitterpated Location: My own little world (also Canada)	I don't think it's a failure of capitalism so much as a failure of the current neocolonial brand of capitalism in place. We're operating on an economic system that, on the macro scale, literally makes no sense. Creating money from debt is as logical as killing people in the name of increasing the population. This may not be the final straw, but I'm of the belief that, until we alter our economic system so that money represents value and not debt, we will be on the road to a royal ass-kicking of some sort. __________________ "Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are even incapable of forming such opinions." - Albert Einstein "Wise men talk because they have something to say; fools, because they have to say something." - Plato

12-31-2008, 03:22 PM	#3 (permalink)
ASU2003 immoral minority Location: Back in Ohio	I think we should take a hard look at trading certain 'commodities' that should have regulated pricing instead of going to the person with the most money. There may be shortages, but you won't see the rich investors being able to make money off the basic needs of the population. The question I think you should ask is if it is the end of unfair globalization? There was only so long that we could continue to export the basic jobs overseas before you get a large amount of people not working (and not counted in unemployment numbers), and don't have the money to buy up houses and cars among other things. While the other countries economies start improving and they are able to buy oil and raw materials to buy products made by their own factories. But there are certain industries that should have some more government oversight and be somewhat regulated and taxed correctly. It will be interesting to see what kind of changes happen in the next few years.

01-02-2009, 04:55 AM	#9 (permalink)
roachboy Super Moderator Location: essex ma	interesting. here's something i've never understood about the libertarian critiques of "fiat currency." maybe you can help me out with it. generally, such critiques are linked to a demand for a return to the gold standard. how is the value of gold any more or less a matter of convention than is the value of paper? best i can figure it, there's no particular difference at this level: rather the difference lay in the finiteness (in principle) of the stock of gold... is that all there is to it? __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

01-02-2009, 01:23 PM	#22 (permalink)
BadNick Riding the Ocean Spray Location: S.E. PA in U Sofa	Call it regulation if you want to use that word, I see "honest disclosure" being the most important component. If the brokers/investment houses were required to disclose the extent of their leveraging, then potential investors could weigh the risks and invest accordingly, or not, depends on how much you want to gamble for the potential return.

01-02-2009, 02:15 PM	#24 (permalink)
roachboy Super Moderator Location: essex ma	there's nothing even unusual about mixed state/private economic sectors in a capitalist context. in fact, if you think about it, capitalism isn't a thing--it's a system of production and ownership, which are at the center of broader modes of social reproduction or control. what capitalism looks like in any given space is a function of the histories of that shape it, that it shapes, etc. so there are many varieties of capitalism: in a sense there's nothing but versions of it. this "definition" of capitalism as involving "free markets" is just another version. the collapse of moral categories into ways of thinking about this social system are nothing more than aspects of the histories of american-style capitalism(s) that are one of many contextual factors that shape where we've collectively landed in the states today. if you say that state action in a market context is socialism, you're making a statement that's only valid within a particular set of political contexts. outside them, it's meaningless. what's finished is neoliberalism--in this, krugman's right. one of the many problems facing the states at the moment--and here more than most places i think--is that neoliberals are ideologically opposed to state action in the economy, so if they find themselves in a position such that reality forces them to act otherwie, they do not know what to do. it's outside their worldview and so can't help but be incoherent. which is, i think, what we're seeing. folk should hope that obama is much more a social democrat than the retro-nature of us mass politics lets him say he is. __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

01-02-2009, 04:48 PM	#28 (permalink)
ASU2003 immoral minority Location: Back in Ohio	Regulations are the brakes that keep the train from going too fast and coming off the tracks. If housing had gone up 3-5% in the past 10 years, house prices would be at the same place that they are right now, yet we would feel a lot better about the outlook of this economy. It's true that it is harder to make money, and growth isn't as fast. But since anyone could have gotten a mortgage, and plenty of people got too many mortgages in order to make a quick buck or borrowed too much from their home's paper value it caused us to get into the mess we are in. Banks have grown too big and should have their size regulated. When IndyMac failed, it was just another bank. But if Chase or Bank of America failed, well there would be major problems. It will be interesting to see in the new administration announces a comprensive economic plan and direction for the next 4 years when they take office.

01-14-2009, 03:23 AM	#29 (permalink)
pai mei Insane	"Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable.The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and State will have to take the road which will eventually lead to communism." Karl Marx, 1867 __________________ Blog One day there will be so many houses, that people will be bored and will go live in tents. "Why are you living in tents ? Are there not enough houses ?" "Yes there are, but we play this Economy game"

01-16-2009, 10:17 AM	#36 (permalink)
roachboy Super Moderator Location: essex ma	ace--in no. 2 it almost sounds like you're arguing for an explicit industrial policy from the state. because without that, how would a regulator--or anyone else for that matter--be able to distinguish between types of consequences? __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

01-16-2009, 02:38 PM	#38 (permalink)
Yakk Wehret Den Anfängen! Location: Ontario, Canada	Ace, individual optimizing actions do not generate globally optimal results in a general free market. That is because Nash equilibriums that are not global maxima exist in most cases. The hope is that the system is set up so that Nash equilibriums exist close to the global maxima, so we can use each individual processing information and making decisions in their own best interest to generate a good approximation to the global maxima solution, far better than a central resource allocation could do. The problem is knowing where the global maxima is challenging. On the other hand, it can be easier to see isolated Nash equilibrium failures and fix them without knowing what the global maximum solution is (ie, you see a situation where action X done by all parties would create efficiency, but action X done by any one party would result in the externalities being captured by other parties. That results in no party having an incentive to individually do action X. A regulation enforcing action X on all parties that costs less than the projected benefit is worth exploring, in order move the Nash equilibrium, and hopefully find a better hill to climb.) Naturally, these experiments can be dangerous -- misestimation of cost of enforcement or return from the policy, or the possibility that the costs cause other more-ideal equilibriums to fall into worse states, can cause damage. The idea of bank regulation is that having companies able to generate market-responsive liquidity, and who have internal incentive to evaluate the worth of people who want cash, is a useful thing for society. But the internal incentives don't line up perfectly -- banks have lots of short-term and medium-term incentives to "bet against the black swan" event. A bank that failed to bet against the black swan would see lower returns on their investments in a systematic way. It would fare better in a catastrophic downturn -- but the damage from that downturn wouldn't be limited to the banks who did bet against the black swan, and the 'cautious' banks would suffer a good chunk of the economic damage that the 'reckless' banks generated. So the idea is that we allow banks to do term-inversion of investments on reasonably large scales in exchange for being conservative in their investment actions. The reserve requirements exist so that the bank can survive a black swan event without collapsing. (The damage caused by a bank collapse is not just limited to bank creditors, account holders, and investors -- due to the economic lubricating job of the bank, it creates far-flung damage that is external to agreements directly with the bank and bank counterparties.) Anyhow, that is how I see it. __________________ Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

01-19-2009, 01:46 AM	#39 (permalink)
tisonlyi Nothing	Has this really gone to game theory? Really? Game theory is still, somehow, fashionable, even though it has never worked in practise and almost all of its original proponents now accept its divorce from reality. Rational actors acting exclusively in their own self-interest... Have never been part of society, will never be part of general society - aside from psychopaths and economists. Human beings, as social animals, will _always_ find ways to cooperate. Game theory is based on strict non-cooperation, hence game theory cannot be applied to anything but simplified situations (like the cold war standoff, to a degree) and absolutely cannot be applied to society. Even Nash (mad as he is and always was) says this himself. __________________ "I do not agree that the dog in a manger has the final right to the manger even though he may have lain there for a very long time. I do not admit that right. I do not admit for instance, that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race to put it that way, has come in and taken their place." - Winston Churchill, 1937 --{ORLY?}--

01-20-2009, 10:44 AM	#40 (permalink)
SpottedThinker Banned	The conservatives who have been in power over the last few decades have made us believe that ANY government spending is socialism. That's just not true. This country was built through strong government programs and spending. The conservative myth that all private spending is wise and productive and public spending foolish and wasteful is what has gotten us into the economic mess we find ourselves in today. There is nothing socialist about having a government that serves the people - we live in a democracy, not a socialist state. It's the decline in national investments that has led us to a place where from 1989 to 2006, the highest-earning 10 percent of U.S. households collected over 90 percent of the nation’s income gains. Today the top 1 percent of American families receives 23 percent of all personal income, up from just 10 percent in 1979. Corporate executives earn 275 times as much as average workers, compared with 27 times in 1973 (these facts are taken from the downloadable book "Thinking Big", which I highly recommend: Thinking Big). If the market and hard work could have saved us - it would have already done so. So yes - the is the final failure of capitalism as it stands.