Is Capitalism on the Ropes?

An indictment of greed! A case for more government intervention! Worst financial crisis since the Great Depression! Failure of capitalism! This list includes the "lessons" of the recent turmoil in the financial markets. Nonsense.

Someone please produce the gun held to the temples of borrowers who put little or no money down, took out "teaser" rates, and then pleaded ignorance or victimhood when the lender -- as stipulated in the contract -- jacked up the rate. Lenders and borrowers expected government/taxpayers to somehow, someway, step in and shield them from the consequences of their decisions. This creates "moral hazard" -- behavior based upon the knowledge of protection from the bad consequences of reckless or irresponsible behavior. Decisions entail risk, whether personal or financial ones.

We have it -- lots of it. Ever hear of the Office of Federal Housing Enterprise Oversight (OFHEO)? This agency, which employs 200 people, exists for one thing and one thing only -- to "oversee" Freddie Mac and Fannie Mae, the "government-sponsored entities" that own or guarantee 40 percent of the nation's residential mortgages. Mere months before Freddie and Fannie's collapse and subsequent government takeover, OFHEO issued a report that saw only clean sailing. The Community Reinvestment Act, passed in 1977, mandated that lenders lend to high-risk borrowers -- or else. The government actually held up prudent bank mergers if one or both sides did not sufficiently "lend" to borrowers who, under normal circumstances, failed to qualify. Why is the federal government in the housing business in the first place? We need less government, not more regulation.

Even if this were true, we aren't even close to that catastrophic event. At the Great Depression's nadir, 25 percent of adults were unemployed, including nearly 50 percent of urban black adults. Economist David Wheelock, of the Federal Reserve Bank of St. Louis, says that by the dawn of 1934, nearly half the urban homes with mortgages were in default, and 7.3 percent of housing structures had been foreclosed. Today 6.4 percent of mortgages are delinquent, 2.75 percent are in the foreclosure process, and 0.6 percent of all housing units are bank-owned.

But what about since the Great Depression? Take the recession of 1980-81. In 1980, inflation averaged 13.58 percent, unemployment increased from 6.3 to 8.5 percent, and the prime loan rate reached an astonishing 21.5 percent. According to the Mortgage Bankers Association, today's delinquency rate is only a little higher than in 1985. And in 1999, the foreclosure rate set records.

According to the FDIC, in the almost two-year period of 2007 and 2008, 15 banks failed. Similarly, during Clinton's last two years in office, 1999 and 2000, 15 banks also failed. In the recession-free years of 1988 and 1989, there were 1,004 bank failures. And since the Great Depression, the average number of yearly bank failures has been 94.

What do you say we actually try capitalism, where private actors reap rewards and assume the risk? "Capitalism," says Kenneth Minogue, professor emeritus at the London School of Economics, "is what people do if you leave them alone." People want "hands off" until, that is, they want "hands on." People want homes, many preferring that option even when renting may be more prudent. Many want rent control to shield them from leasing at fair market rates. Democratic presidential candidate Barack Obama promises "world-class" education -- with taxpayers paying for it. And the federal government, in dramatic contradiction with the limited-government intention of the Constitution, involves itself in health care, guaranteeing private-sector retirement accounts, disaster relief, welfare, unemployment compensation benefits, retirement benefits, etc.

The Federal Reserve Bank, in effect, prints money to pay for things that voters demand -- but their taxes cannot cover. The proposed bailout of financial institutions enables the Fed to create hundreds of billions of dollars out of thin air. The cost is greater inflation -- a stealth tax on us all.

In 1930, before Franklin Delano Roosevelt's New Deal, taxpayers paid about 12 percent of their income to all three levels of government -- state, local and federal. Today we pay approximately 40 percent -- even more if you attach a value to unfunded mandates, such as those issued by agencies such as OSHA.

Seriously, if you have the heart to do it,

find out how to take out an ad in your local homeschool association’s newsletter offering tutoring services.

One thing, you’ll definitely have a receptive audience, and kids with a desire to learn.

So, yes, our recent financial turmoil does suggest failure -- a failure to truly practice capitalism and a failure to accept and believe in the value, appropriateness and morality of a limited government and maximum personal responsibility.

As long as the regular Joe and the regular Jane out there don't understand the repercussions of socialism, they will continue voting for more government intervention and more government "giveaways".

I'll go as far as saying that, if Obama gets elected, and the democrats retain control of congress, that anybody that truly believes in capitalism, should look for friendlier grounds in which to practice such capitalism. The U.S. ain't going to be it.

Within 5 to 10 years, capitalism will cease to be the primary driver of our economy. And, with capitalism on the way out in the U.S., within 10 to 20 years, the U.S. will cease to be the number one economy in the world. Within those same 10 to 20 years, the beginning of a major depression will overtake the U.S. And, as goes the U.S., so goes the rest of the world.

With the U.S. in recession or in depression, the world will become increasingly more dangerous because we won't have the economic and military power to suppress or overcome any conflicts, whether small or large. With more countries becoming more belligerent and with more and more regional conflicts around the world, it's only a matter of time before some major countries cease to exist or start on the road to self-destruction.

Bottom line is that, without capitalism, the U.S. and the whole world suffer.

If I were to want to start a new business right now, I would be looking for anyplace that is not as hostile as the U.S. is becoming. Is there such a place? Perhaps it would be best for the good of the U.S. to split into a Socialist U.S. and a Conservative U.S. I wonder which one would end up ahead. I'm pretty sure I know.

Um, nice theoretical verbage, but if Obama with a democrat Congress comes to power, within three years there will be marshal law to handle the food and fuel riots in the big cities. Roving bands will be cruising suburban areas invading homes and taking what they want.

Yeah, I know, doomsday scenario. But that is in fact what will happen with a financial meltdown with fuel priced near ten dollars per gallon. The dominoes will start to fall as gas goes beyond five bucks per gallon, with trucking failing to resupply city stocks of food, etc. NAd inflation blasting prices through the roof. The democrat government will try to put price controls on and industries will just stop doing business because they can't make a profit.

The financial crisis clinton and company have engineered is coming to fruition, but the plan was to have Hillary in the White House when this hit so sinkEmperor could be the savior. The plan didn't foresee the almost blackman pushing her lownness aside. But the financial meltdown will run a course, except where postponed with a massive temporary taxpayer funded bailout.

Democrat criminal enterprise policies are destroying this Republic, and the bastard media are preventing the people from comprehending the causes and the full extent of what is coming by previous design. This financial crisis has the possibility to be far more bloody than the great depression because so many now live as dependants upon transport of food stocks to the cities. In the late twenties, most Americans did not live in population concentrations as we have now.

Buy ammo now, don't wait to see if Barry and his commies win the election because one of the fiurst moves of control will be to halt ammo and weapon sales so the government can control the population.

I checked and there is an association here in Indy. Do you think they'd bite on this: Ask the association if they'd provide a venue for any student who understands how to read a graph. (Probably 9th graders or higher, I'd guess.) At least one parent must also attend with their child. (Teach the teacher, right?) Give a one hour lecture with a collection box at the back. If they got something out of it, make a donation. If not, no donation. If the first one was successful, I'd offer to do another one. Would they go for something like that??

Sounds like a decent idea. I’d modify it some, given my understanding of the homeschooling culture.

The donation is a great idea - drop in something if you got something out of the lecture.

I wouldn’t “require” a parent to attend, but I’d “encourage” (you WON’T have discipline problems without a parent present).

You should open it to any student who “understands a graph”, but don’t put a grade/age restriction on it - the parents are the best judges of whether their kid can get something out of it. I’m betting you would get some younger than 9th grade that would surprise the heck out of you.

One thing I just thought of, you could have a quick “survey” at the end of the class. Have the student/parent write their age or “parent” and take a short comprehension quiz on the major points. You’ll see how young they “get it”.

“We are looking at the Atlas Shrugged scenario.”

The tipping point for the individuals in Atlas Shrugged is reached when people give up on correcting their errant government and culture from within.

When that point is reached a decision must be reached as to the next step:

- Give up and just accept what you have and survive as best you can.

- Try to bring about change in other ways - perhaps with force.

- The “Atlas Shrugged Scenario”: Abandon the old to continue its own self destruction and create a new society.
That worked pretty well for our forefathers as well as John Galt and others in Atlas Shrugged.

Its hard to tell where we are right now.
Most people still have faith that we can correct the path we are on.
But that belief will face a big test as the reality of the powers behind the bailout philosophy takes hold.

If it comes to it, is there really an “Atlas Shrugged Scenario” available in today’s world?

The government doesn’t mind too much when people opt out to idle, non-productive lives existing on the government dole.
But they react quite differently when strong individuals opt out to live self relient lives based on conservative principles. (Ruby Ridge)

At a minimum we are now reaching a point where the Founding Fathers would have said “ENOUGH!”
We can be pretty sure what their next step would be.
But what is the likelyhood that many Americans of today would inconvenience themselves for a principle?

Gondring, "If it must be, then I hope it happens sooner rather than later."

I had been thinking it would last another few years,
but now I'm thinking it may be months.

ClearCase_guy, "Well, I don't want these things to happen, but I do think that the only thing
that can make this country well will be a period of great stress and strife -- not as catharsis,
but just to flush out the bad ideas that have permeated our system."

Flush is a good word.

Good points! I would have just stated that an understanding of graphs is helpful. I’ve never had any discipline problems during a talk and that wasn’t why I was hopeful parents might attend. My idea was that the parent might want to pass what was said on to another member of the family (teach the teacher). If the concept is successful, I’d eventually put myself out of business, which would be great!

Like I teach the students in my high school social studies class:

“Capitalism describes the natural way human beings trade with each other.”

Which implies that any other kind of system is an artificial interference with capitalism.

You won’t be seeing young idiots coming out of my classroom saying communism is a great idea that just hasn’t been tried correctly yet. I’m just creating more Milton Friedmans every day out here.

No, it’s not. It’s the best system, and will prevail. It’s the only system that allows the individual to decide their own economic fate. It’s the only system that nurtures creativity.

True ... but capitalism is just like any other aspect of a free society. For it to work properly, it also requires a preponderance of its practitioners to be both moral and responsible.

When the focus turns from "making honest money" to simply "making money," then "capitalism" becomes something ugly. I would say that many of the nice companies who put this mess onto the fast track have made that fatal turn.

“When the focus turns from “making honest money” to simply “making money,” then “capitalism” becomes something ugly.”

I agree, but inherent in your comment is the very reason why it is the best system. It is the best system because human beings are flawed and have a propensity to put their own self-interests ahead of doing what is moral and responsible. In that context it is clear that society is more motivated to work and be industrious if there is a personal award associated with that effort. Put that way it sounds mercenary, but in the end it allows society to progress while at the same time allowing human beings the freedom to choose to be moral and responsible.

Trying to coerce morality/responsibility/goodness doesn't work because 1. In a coercive system what is moral/responsible/good is defined by a relatively small number of people who are in power and who are also subject to the imperfections of being self-interested human beings, 2. True changes in human behavior, true charity, true morality, true spirituality require personal choice and have to come from the heart of the individual. Coercion doesn't work. The minute the USSR dissolved, the coerced ‘peace’ among different rival factions erupted, because true peace required the individuals in those factions to truly think differently about each other. They didn't.

Capitalism favors individuality, and individuality is essential for the dignity and progression of humanity,

And this time, a crapload of innocent folks stand to get hurt by it, because the bad behavior became the standard, rather than the exception.

You're just peddling the standard bromides. The fact remains: without a preponderance of responsible, moral people in the big positions, "capitalism" tends to move toward criminal behavior.

“The fact remains: without a preponderance of responsible, moral people in the big positions, “capitalism” tends to move toward criminal behavior.”

The fact is, when you concentrate power in a small number of people, which is always the functional result in socialism, communism, fascism, and all other systems I can think of, the end result is always a movement toward criminal behavior (Stalin, Hitler, Castro, Khomeini, etc., etc.). On the other hand, when you have a pure democracy there is also the risk of the ‘tyranny of the masses’ and suppression of the individual. That’s why the founding fathers set up our government the way they did with all the checks and balances. I agree with your overall premise, which is why oversight is essential in a capitalist system just like any other system. Although our spiritual journey will hopefully bring us to a place in which making moral choices and being responsible is ubiquitous, at this point in our history we need to protect ourselves against predators, both from without and from within our own system.

the people living under those systems are dependent upon the morality of the relatively small numbers of people governing them, and

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