20090407

Capitalism Isn't Working

Someone please tell me how capitalism works.

1 comment:

Anon said...

Ahhh the post that I have been waiting for. First I would like to point out that we do not have a system of capitalism. With a dash of socialism and a pinch of fascism and there you have it, a mixed economy. The difference between capitalism and the other two economic structures that I just named is that capitalism allows for the greatest amount of liberty and requires no government. In a capitalist economy you cannot have, government regulators, central bank, bailouts, licenses (permission slips), protectionism, business welfare, government and business cooperations because it will distort the market in a socialist/fascist way. Well then, why does our system of "capitalism" not work like it is supposed to?


The Money

In Article 1 Section 10 of the United States Constitution "No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility." I made bold one thing of great importance let us deal with it. Why is having a metal as money important? Some good features of money are durability, divisible, easily recognizable and you cannot easily make more gold. An earlier article of your's you went with mainstream economics and defined inflation as being a general price increase but according to the Austrian school of economics (the line of thought that predicted the great depression, .com crash, current crash, etc) inflation is the increase of the money supply be it gold, paper notes, or numbers in a computer. The symptom of monetary inflation is a general and uneven rise in prices of goods. With gold and/or silver you cannot easily produce more for money therefore you cannot easily inflate. When you make more dollars they lose value and take more dollars to buy the same thing. This is the reason why granny cannot buy her chocolate bar for a nickel anymore. Wages do not keep up with inflation and saving money becomes less important. And with saving I will move on with..


The Federal reserve and interest rates

The Federal Reserve Bank is not part of government. It is the great fascist way of controlling the economy. The federal reserve bank does things in secret and does not inform "the people" of everything it does. On a whim it will arbitrarily set the interest rate and this is why we are in the mess we are in now. In a capitalist structure interest rates are set by each bank holding savings. The greater amount of savings means it can loan at a lower rate. And banks would be competing for people to do business with them so they could deposit the money they own so in turn the bank can lend it out. The interest rate today creates bad market signals. If the interest rate is low this should imply that people have more money to spend on whatever. But if it is low because I said so this will give people the signal to invest but the spenders could not keep up with all the goods and services they have to offer so then some businesses will eventually fail and people will lose jobs and prices will raise due to all the new money circulating and so on.The economy went boom but then it went bust and everyone turns to the same people who created the problem to fix it.


Government Regulation

Capitalism provides regulation through competition and standards organizations. Government regulation is arbitrary. If opened up a restaurant then I have to directly compete with everyone else that is providing the same business while also indirectly compete with places like grocery stores. If my prices are too high, I serve food that makes you sick or even provide bad customer service then another restaurant is not far away. I will lose business and eventually have to close if I do not give in to consumer demand. I hear some people say that businesses would be killing us if we didn't have government to regulate them but then I ask how would they get more money from dead customers? Sure there would be a bad business every now and then that tries to provide bad goods or services but they would soon go out of business and they already have laws against fraud and breaking contract. Then we have private organizations like Underwriters Laboratories which have a standard that electronic companies must pass in order to get certified by them. Without government regulation there is market regulation. Regulations add to the cost of doing business which are paid for by the consumer in higher prices of goods and services. If you take a long deep look into the health care industry you will see a mountain of regulation that add to the great cost of the services they provide. When my grandparents had their first child they were able to pay out of pocket and they were in the lower middle class. Now if you do not have some kind of insurance you might as well file for bankruptcy. Thanks Dr. Government.


I am done here for now and will let you give your counter point. I am no economist but I do have a deep interest in the subject. and I leave with with a quote from the great economist Murray N Rothbard. Keep this in mind when preaching against capitalism.


"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance."

Post a Comment

Thank you for sharing. I appreciate that you viewed this content and that it was worth enough thought for you to comment about it.