Capitalism
Encyclopedia Article - Encarta
Throughout its history, but especially during its ascendency in the 19th century, capitalism has had certain key characteristics. First, basic production facilities—land and capital—are privately owned.
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Consumers are free to spend their incomes in ways that they believe will yield the greatest satisfaction. This principle, called consumer sovereignty, reflects the idea that under capitalism producers will be forced by competition to use their resources in ways that will best satisfy the wants of consumers. Self-interest and the pursuit of gain lead them to do this.
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if competition is present, economic activity will be self-regulating.
http://encarta.msn.com/...
Capitalism assumes Self-interest will lead to Self-regulation. But what do Current Events really tell us, about this basic assumption that in Capitalist systems, consumer-driven "course corrections" will naturally lead to "the well-being of society" as a whole?
(aka The theory of the Invisible Hand, promoted by Adam Smith, and others)
Those competitive Capital forces, known as Hedge Funds, forced Real Estate to fall faster, (and further) that they might have otherwise. They got the ball rolling ... they were "the Mice turned loose, in the Room full of nervous Elephants:"
Bears still betting against real estate despite selloff
Short interest activity is on the increase
By Janet Morrissey --March 8, 2009
Wall Street skeptics continue to step up their bets against battered real estate investment trusts. [REITs]
[...]
The shorts, usually hedge funds and other sophisticated investors, began moving into the group en masse in July — a couple of months before the sector sold off.
(emphasis added)
http://www.investmentnews.com/...
Short-sellers have their rationale, though. They are actually "performing a service to Society" (they claim) when they Profit from "ruthlessly driving down" the Price of Company, to its true worth (somewhere near $0). Kind of like the service Wolves do, for Buffalo Herds, I guess. All in a day's work, for those Apex Predators.
A Brief History Of Short Selling
By Claire Suddath -- Time.com - Sep. 22, 2008
Short sellers were the first to discover problems at Enron, WorldCom and Bear Stearns. As Vanderbilt University economics professor Peter Rousseau puts it, "It's always good to have people on both sides." Critics, however, say that when short sellers pile into a particular stock, their borrowed 'sell' orders can swamp the market — forcing the price to plummet.
Shorts are most visible when any kind of speculative bubble starts to burst.
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Every time a market crashes, short selling is blamed because even legitimate short transactions — with stocks that actually exist — drive prices down faster.
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As short sellers would argue, they were merely pricking a bubble that was going to burst anyway.
(emphasis added)
http://www.time.com/...
But wait a minute, those billion dollar Hedge Funds can make a Profit by Gouging Consumers too? This next Capitalist News tid bit, sounds more like "Speculator Sovereignty" running the show, than it does "Consumer Sovereignty" (as the advocates of Capitalism would hold).
When the price of gas skyrocketed to $4+ a gallon, how did the "forces of competition" help out the "the well-being of society" then? If you had to drive to work, you really didn't have any a choice, did you? Some Demands are Inelastic -- inflexible -- you need to buy it, whatever the Price is. (That's why God invented Credit Cards, don't you know?)
Oil experts: Curb speculation to cut prices
By Lara Moscrip, CNNMoney.com
June 24, 2008
Hedge fund manager, adviser tell Congress crude could drop by half in 30 days if new regulations are implemented.
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Michael Masters, of Masters Capital Management, told a subcommittee of the House Energy and Commerce Committee that - with greater regulation - oil prices could drop to $65 or $70 a barrel within about 30 days.
"That's half of where prices are today, and gas prices would reflect that," he said.
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But the head of the agency that regulates U.S. commodity futures said increasing the amount of money speculators need to put up to buy an oil contract - something the agency can do now in emergencies - could have unintended consequences.
"Changing margin requirements may drive businesses elsewhere to London and over-the-counter markets," said Commodity Futures Trading Commission Acting Chairman Walter Lukken. "I'm not sure it would get [index traders] out of the market," he said.
(emphasis added)
http://money.cnn.com/...
Driving the Vulture Predictors elsewhere, is a Bad Thing, again WHY?
And as current events have shown once again, the last six months, We "Sovereign Consumers" can be compelled to Bail Out so many poorly-managed Behemoth Banks, BUT such charity does NOT compel Banks to do any favors for the battered-Consumer wants or needs (Where is the Profit in that, those Captains of Capital, always rationalize). So much for the idea that free markets, will achieve the best price, for all -- (Behemoths seem to have a their own set of rules -- it's the welfare of their "Global Counter-Parties", that worries these Dinosaurs most.)
Bankers know who really IS King, in the current implementation of Global Capitalism. (In the realm of "One World Order", Capital is King, and there is little need for the lowly Consumers -- afterall they are replaceable, aren't they? ... What's the word -- as Consumers, we're Fungible! )
Credit Card Borrowers Say Regulation Is Overdue
Shaun Boyd - Apr 24, 2009
"I understand they need to turn a profit to stay in business, but 27-percent interest, that's outrageous," said Dave Brandl.
The banks argue tougher restrictions in this economy will result in tighter lending standards that could mean less credit for those who need it most.
"The rules will be in place a year and a half from now, there would be a tendency on the part of some banks to increase rates now to take advantage of the lull," said Sen. Udall.
(emphasis added)
http://cbs4denver.com/...
Once again it is the "Needs of the Predators" that is paramount, when it comes to "defining the the Rules of the Game". (It doesn't matter if the Playing Field is Tilted, long as the Corporations, always get the "Down-Hill" Advantage -- Touchdown! Again! )
Capitalism assumes Self-interest will lead to Self-regulation, as a natural by-product of Free and Unregulated Markets --
Could it be that there is "a flaw", or two, in that Theory?
Well, please recall the shocking admissions about some of "the flaws with Self-regulation" (oops!), by one of laissez-faire Capitalism's biggest cheerleaders:
The former Federal Reserve chairman, Alan Greenspan, has conceded that the global financial crisis has exposed a "mistake" in the free market ideology which guided his 18-year stewardship of US monetary policy.
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During a feisty exchange on Capitol Hill, he told the House oversight committee that he regretted his opposition to regulatory curbs on certain types of financial derivatives which have left banks on Wall Street and in the Square Mile facing billions of dollars worth of liabilities.
"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan.
(emphasis added)
http://www.guardian.co.uk/...
Perhaps Greenspan finally read the "fine print" behind all those unregulated Credit Default Swaps -- and he discovered that, instead of promoting the greater Societal Good, the forces of Infinite Greed simply invented new "creative ways" to front-load all the Profits from OUR Mortgages, and Off-load all the Risk and pain, to some other "institutional consumer" (some other fool). The only thing Credit Default Swaps optimized was their own immediate personal profits, damn the consequences, for the Bagholders!
Perhaps we should start calling it "Predatory Capitalism", eh Alan?
(Maybe that would put the "Fear of T-Rex" into those Wall Street Wizards?)
The Demand For Risk And A Macroeconomic Theory of Credit Default Swaps: Part 2
Charles Davi - Jan 11, 2009
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with credit derivatives, some investors will choose synthetic bonds rather than real bonds, thereby reducing the amount of cash exposed to credit risk. Thus, rather than increase the impact of credit risk, credit default swaps actually decrease the impact of credit risk by placating the demand for exposure to credit risk with synthetic instruments that are incapable of producing net losses. However, there may be consequences arising from credit default swaps that cause actual cash losses to an economy, such as a firm failing because of its obligations under credit default swaps. But the failure is not caused by the instrument itself. The nature of the instrument is to reduce the impact of credit risk. The firm’s failure is caused by that firm’s own poor risk management.
(emphasis added)
http://www.rgemonitor.com/...
Because of all the Name-calling and Banner-waving from the Right and the Elites, it is doubtful, that the concept of Corporate-driven Capitalism will ever undergo a serious "User Review", even though its many competing theory, contain some assumptions and principles of their own, that might be worth considering. (But in the "Land of One-Dimensional Thinking", Right or Wrong, Librul or Neocon, MY County Love it or Leave it -- stuck in such Dog-eat-Dog territory, well introspective Economic Review is simply unheard of! ... Best cast those Pearls of Wisdom elsewhere ...)
Just look at how much respect, Bernie Sanders gets, when he dares to call himself a "Democratic Socialist" -- it's like he has betrayed some Oath of the secret society of "Skull and Bones" or something!
Sanders (I-VT) is however a rare Voice of Reason, making sense, in the 4-Dimensional Universe, in which we, mere Humans, live and play, and compete, everyday.
Perhaps he too, like the Oracle Greenspan, has realized Unchecked Capitalism, does indeed, have a few flaws:
Socialism
Encyclopedia Article - Encarta
Socialism was originally based in the working class and has generally been opposed to capitalism, which is based on private ownership and a free-market economy. Socialists have advocated nationalization (government ownership and control) of natural resources, basic industries, banking and credit institutions, and public utilities.
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They declared that socialism could best be attained by reformist, parliamentary, and evolutionary methods, including the support of the middle class.
(emphasis added)
http://encarta.msn.com/...
Why should those "public utilities", on which we all "commonly" depend, be source of limitless profit, for the very few, who are lucky enough to own them?
Why should the well-being of the many, receive such little weight, in day-to-day market events, or even in the Halls of OUR Government? (Why do OUR Elected Officials cater more to Lobbyists, than their Constituents, sometimes? Seems they have their own little "recurring competition" problems.)
As a Socially-aware, and Environmentally-concerned Consumer, I would choose a Green, Clean Power Company, given that choice (even if it cost more -- I can "walk and chew gum"). It's funny though, how the System of Short-term Profits, and Off-loading the Risks to Future Generations, has FAILED to make that Enlightened Choice available, to most Consumers like me.
But what we get instead, is the sole choice for the "Cheapest Energy" possible, NOT the Safest and Cleanest, Renewal Energy -- because basically, "Capitalists have yet to see the Easy Profits in that!" Achieving a sustainable livable planet, is always "somebody else's problem", when the Titans of Capital simply strive to pile up the most Chips, before the Game's over.
WHY is gaining entry to an immensely powerful, but very tiny, Elite class of Millionaires & Billionaires, such an over-arching "National Ideal" for everyone, again? "Monopoly" is a such a boring Game, don't you think? ... (Can't we dream, better Dreams, than keeping up with "the Gates'" or "Winning the Lotto"?)
If Corporations, insist on demanding the same rights as People, including the ability to influence Legislation through Lobbying -- shouldn't those Corporate-Persons also be required to fully Pay their Taxes, and invest profits in, and Reside in, the County that "gives them" their contrived "citizenship"?
The only self-interest most Corporate-Persons have, is boosting that next Quarterly Profit Statement, by any means necessary -- damn the consequences!
So much "Consumer Sovereignty", eh? --
I think that "Invisible Hand", has learned how to pick our pockets, without us even realizing, given the ever more costly nature of Homes, Gas, Food, Health Care, Education, Transportation, and 401k ... (feels like the slope of that Playing Field has been approach 45 Degrees lately! )
That certainly WAS "some mistake" Alan Greenspan!
Good Job, Sir -- NOT!
Your little "whoopsie" mistake, has only managed to decimate the American Dream. (Yes, Unchecked Greed is that powerful! -- Oops! ... just ask Geithner, HOW much Banks like Self-Regulating? -- it's worse than Spinach with Vitamins sprinkled on top!)
It just may be time for America to go back Class, to take a refresher course on Economic Theory --
Someone tell me please, How does the paramount goal of Short-Term Corporate Profits ever square with our Long-Term Human Aspirations and Needs, as an intelligent Species?
Did T-Rex ultimately "win", its short-sighted Game?
Or did, the more intelligent, adaptable, warm-blooded Mammals?
Who created this Frankenstein Monster -- and WHERE is the Off-Switch?