Forbes: How Capitalism Will Save Us
December 29, 2008 by FCD Administrator
Filed under Current, Money & Economics, Principle 07
By Steve Forbes (Forbes Magazine) |We are experiencing the devastating consequences of a chain of major economic policy errors, which, to use a current cliché, created the perfect storm. These government blunders temporarily paralyzed the global credit system and are now sending the U.S. and Europe into recession, while sharply cutting back Asia’s growth rates.
Left to its own devices, the credit crisis, which began in August 2007, would have crushed economies as severely as did the Great Depression.
Belatedly, but thankfully, governments recognized that the only way to get credit flowing again was for them to make quick and direct massive infusions of new equity into beleaguered banks, as well as commit to other emergency measures hitherto unimaginable.
If sensible rescue efforts continue–and they will–the immediate crisis will quickly pass. Shell-shocked businesses and consumers won’t recover rapidly from the trauma of recent months, especially as we now cope with recession. But the downturn shouldn’t be prolonged: The economy here and those overseas should start to pick up no later than next spring.
That soon? Despite the crisis, the global economy still retains enormous strengths. Between the early 1980s and 2007 we lived in an economic Golden Age. Never before have so many people advanced so far economically in so short a period of time as they have during the last 25 years. Until the credit crisis, 70 million people a year were joining the middle class. The U.S. kicked off this long boom with the economic reforms of Ronald Reagan, particularly his enormous income tax cuts. We burst from the economic stagnation of the 1970s into a dynamic, innovative, high-tech-oriented economy. Even in recent years the much-maligned U.S. did well. Between year-end 2002 and year-end 2007 U.S. growth exceeded the entire size of China’s economy. Obviously China’s growth rates were higher, but China was coming off a much smaller base.
The world is flush with cash. It’s frozen because of fear, but the cash is there. Productivity gains are burgeoning.
So, will this global boom resume next year, slowly at first and then with increasing momentum? It should. Whether that happens, however, depends on the next, highly dangerous phase: <<<Read the Full Story>>>
>>>Learn more about Capitalism and becoming a capitalist
“Belatedly, but thankfully, governments recognized that the only way to get credit flowing again was for them to make quick and direct massive infusions of new equity into beleaguered banks, as well as commit to other emergency measures hitherto unimaginable.”
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Ok, red-flags going off all over in my head on that one.. I’m afraid that the author of the Forbes article has no idea what “Capitalism” is, they are therefore, un-qualified to write about it. Harsh? perhaps. My evidence? Their own words.
“Left to its own devices,” the Free Market would have righted itself as a result of people learning the consequences of actions, both positive consequences for principle-based action, and negative consequences for action that violates principles.
Now that the gov’t has stepped in, banks and other lending institutions have not learned that unprincipled business practices lead to negative consequences, and they’re continuing to act in the same way that had its part in ‘The Crisis’.
At least the following statement was made out of some sort of Abundancy Paradigm: “The world is flush with cash. It’s frozen because of fear, but the cash is there. Productivity gains are burgeoning.”
Looking past some of the rest, shrinking and re-focusing The Fed, along with re-fixing the value of the dollar in some way are the critical points of this article
i’m not sure wheter this statement is true “The world is flush with cash. It’s frozen because of fear, but the cash is there”
if this statement is true then how could the global financial crisis is exist? as we know that the crisis start with mortgage funds problem which spread widely to entire world..as almost all banks in many countries invest their money in this kind of investment in US..the big question is how could this happened? a commercial paper,or investment instrument which lack of cash guarantee by issuer.. as a result, when the owner of the instrument is withdrawing the money, issuer are lack of cash!
i think, banks should back to its original functions as mediator to those who have more money and then supply the money to those who needed. but in fact in this age, most of banks in many countries investing the money to many instruments such as hedge funds and other stock market instruments which means that they’ve already move from it’s original functions..