Life As It Goes By

I find it hard to accept when I saw people in the TV, holding up boards stating it’s the death of capitalism.

Merriam-Webster explains capitalism as an economic system characterized by private or corporate ownership of capital goods and … An economic system is a system that he production, distribution and consumption of goods and services between the entities in a particular society. It is the method used by society to produce and distribute goods and services (Source: Wikipedia). It is also a part of the social system.

Hence, we can treat capitalism (market economy) as something on the same level as communism and socialism (both are of planned economy). Perhaps democratic should be used in place of capitalism to reflect the relationship among the three. Yes, one can link capitalism with freedom together. The lack of regulation provides the freedom to the economy and the opposite applies too.

What we see today in the States is the abundance of regulation. Necessity is the reason brought forward for it. I believe President Obama would opt to be more democratic if he’s given the choice. Given the state of things that he was put in charge of early this year, I would say without hesitation that a good job has been done so far. Amazingly, an expected, great depression has been averted. What’s more, the tide seems to be moving to the opposite direction, giving a sense of hope for economic recovery.

I still remember him saying something about change. Wasn’t really prepared for such a huge one. Will lives be changed permanently? I think so. Even though it’s remarkable to see how the US government manage to salvage such a financial & economic crisis, one has to be even more impressed to see how they live on with trillion dollars of debts. And only the United States of America has the ability to do so. The Russians had defaulted before and they are not the only ones. A similar “technical” reset for US may be healthy for the long term.

However, the US dollar carries too much burden. A slight sneeze shakes the world markets. The world needs some “used to” for a cheaper Dollar. Once it is ready, it would look for options. Debasing the US currency will not only lighten the loads for US but also holds the value of the goods and services.

Second reason why a reset would not happen is probably the loss of pride as a leader and the priviledges that come with it. Never before has the pride been at such low levels before. The world is already pointing the finger at the US for what has happened. The lost trusts will take a longer time to recover now. Ties have to be mended and more assurance has to be given.

This is probably why the need for so much regulation. The US administration has to deal with too many issues at 1 go: turning the wrongs to rights, setting barriers to future mistakes and finding ways to the tunnels of light. And all these in a short period of 4 years before the next in line takes over. By the way, sympathy is scarce nowadays. People are running out of patience for what the government can do for them.

One delightful result, out of the half year’s of efforts, perhaps is the level of confidence in the Americans. They begin to believe the worst is over. The government stimulus did play a big part in filling up the holes, making it looked like nothing has happened before. Keeping the jobs has helped tremendously. With pays coming each month, people has the prospensity to spend or even save in times like this. This is the most important.

The anger level has subsided much as well. They are more ready to move on the next level of anger management: to face with their problems bravely. It’s true that those b***tards in the financial sector created all these. Let this be a big-time lesson on greed itself.

Coming back to capitalism, it’s no way walking near its grave. It is the de facto system for economies around the world, especially with the collapse of the communist systems. It only comes to show again that the old, wise concepts of Keynesian economy prove to be economic crisis resilient. Controlling the money supply in a “free” manner doesn’t provide much help. In fact, pegging the currency against other major ones (via swaps) gives more stability.

So, the golden rule is: in time of boom, use “Reaganomics” and in time of crisis, use Keynesian economics. Regulation has to be in place to ensure that things don’t go out of bounds. If not, it would be what is happening now. But then again, the Americans have a funny way of doing things. It seems like they prefer to go in bigger circles each time (From Glass-Steagall Act to Gramm-Leach-Bliley Act). This definitely qualifies for a big part of our lives.