By Michael McCune
The Financial Times ran a recent series, “Capitalism in Crisis,” in which they’ve omitted indentifying the crisis. But some of the reasons given for the impending crisis climax are troubling. In one the FT asserts “”leaders of rich nations sidestepped their differences to avert a worldwide (economic) slump.” No, world leaders sidestepped their differences to keep their power positions intact, they did absolutely nothing to address the impending crisis.
As a point of reference, the current European trouble with the PIIGS should be examined–again. The PIIGs (Portugal, Ireland, Italy, Greece and Spain) are in debt trouble. The governments have more debt than the economy can bear and have been forced, by association with the euro currency, to borrow increasingly large amounts to service their debt, payment of maturing debt and continue their countries’ spiral into economic oblivion. For the decade-long history of the euro, these five countries have been a constant sore spot because they have no desire to reign in the debt but have looked elsewhere for funding of their errant practices.
As long as these countries were financially independent of the rest of Europe, there was little anyone from the outside could or would do. But now their future threatens France and Germany, the two financial stalwarts of the euro. What all the parties failed to recognize was adding these financial duds was a recipe for total collapse of the whole continent. The countries coming in had no idea the strength of the euro would actually hasten their own demise by putting more strain on their huge debt and the stable countries miscalculated how badly the insolvency of the PIIGS would damage their own financial standing. The leaders didn’t sidestep into this arrangement, they merely saw it as a vehicle to bring more humans into the sphere of their power and proceeded on that basis.
Here in America the same situation exists. Our Federal Reserve is not “helping solve the economic problem” but abetting it. The fundamental flaw in their thinking is that capitalism has failed; citing Lehman Bros. and Bear Stearns as the prime exmples.
Capitalism was working when those two entities went under. Financially they were bankrupt and morally they were bankrupt. They had become houses of incompetency and capitalism demanded they pay the price. The Fed, mismanaged by BS Bernanke, and our inept federal government jumped in to save their sinking power ship and bailed out the financial sector, preventing a cleansing of the system.
They put a happy face on the situation but the problem is still there, just as the PIIGS debt problem still stalks the European Union. The problem, contrary to what FT reports is not too much capitalism but too little. Capitalism was sliced off at the knees and couldn’t do its work because of interference from Washington.
The politicians had created an artificial demand in the housing industry, low interest rates fed the fire and Wall Street picked up on it. When the fast profits rolled in, Wall Street sharks were in a feeding frenzy. But somewhere along the line money managers forgot giving the loans–which earned them record fees–also meant someone had to collect payment on those loans. Wall Street abandoned capitalistic ideals and the reins of control went from true capitalists to mere money managers whose only goal was increased profits, no matter the cost.
When the bubble popped it was the shareholders who got stuck, not the managers. By the same token the people who were responsible citizens got stuck when the government bailouts meant the transfer of those worthless holdings to the federal government itself. Government’s power corruption is hitting twice as hard on the very people who took the body slam of home devaluation–the middle class.
The whole bubble has not yet popped, merely reformed into some small bubbles and one massive one: Wall Street’s holy market indices. But this new bubble is more fragile than the previous one and has more victims in its arena. FT’s solution is to continue extending government control to “extend and refurbish the multilateral order to make economic integration with great global governance.”
To an American, that is abhorrant. To a conservative it is antithetical. But to a country that has allowed the appointment of 47 czars, the introduction of 250,000 pages of new regulation and some patently unConstitutional laws over the past three years, economic collapse doesn’t seem to be a problem. Or haven’t you noticed the 9% rise in major stock averages in the last month?
Better make sure you are financially strapped in as well as any NASCAR driver because the crash that’s coming for this runaway locomotive promises to be a doozy. We are in a streamlined vehicle, driving in a fog with ice on the road. We won’t see the problem until we hit it and there’s nothing to stop the guy behind us from doing the same thing. Instead of rushing into the wreck we ought to be holding back so we are last in and avoid getting hit from all sides.
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That insight’s perfect for what I need. Thanks!