Tuesday, January 26, 2010

Capitalism turned into a pyramid

Stiglitz: "US does not have capitalism now"

It becomes increasingly clear that the financial establishment turned free market economy into a global pyramid scheme.

Posted by ant @ 09:06 AM (1060 views)
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7 thoughts on “Capitalism turned into a pyramid

  • A pyramid scheme requires constant expansion to survive. Is this different from capitalism?
    Does ‘real’ capitalism require constant expansion or not?

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  • “Does ‘real’ capitalism require constant expansion or not?”

    Hi, probably depends on whether you’ve got an expanding population or not. Population expansion probably isn’t much of a problem in the US yet at least in terms of physical space but it arguably is already in the UK – but it’s a taboo subject. Sooner or later the world is gonna start running out of basic resources like fresh water – in ALL countries. In the meantime, I’d argue a capitalist society *could* tick over with no expansion provided you’ve got a constant number of people employed in companies that are collectively profitable enough to support a constant number of unemployed – and exactly the right population for one new employee to be available for every one that retires… Oh and plenty of cheap houses as well… Just don’t build them anywhere green – tower blocks it is then – k thanks bye!

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  • 1. shipbuilder

    That depends on who makes the rules and who benefits.

    I have said before that capitalism can become a self fulfilling prophecy.

    Capitalism
    An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a ‘free market.’

    See where the problem is? Media monopoly and just a dash of politics can tip the scales of a free market.

    There is a problem with media coverage and the financing system of political parties. Those that claim to be pro capitalism have a vested interest in everything but, when push comes to shove.

    Does ‘real’ capitalism require constant expansion or not? Real capitalism is driven by a real capitalist mindset of greed. YES, untill it goes wrong. That brings us back to politics. The magic circle.

    Ain’t no system perfect when personal interests are involved.

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  • Surely expansion is only necessary as a result of central bank interest? Get rid of the central bank…

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  • In capitalism a constant exponential expansion of money supply is balanced by constant exponential expansion of GDP and inflation. If these two pyramids stay in balance the system is stable. Any small instability leads to recession, high interest rates and other unwanted effects. In the case of the current crisis it was an exponential expansion of banks balance sheets that was not matched by money supply. Hence, liquidity crisis. The attempts to balance it with debt impoverishes us. The attempt to balance it with quantitative easing is likely to result in high inflation which will impoverish us even further. A pyramid scheme is an unbalanced exponential growth and lending with loan to deposit ratio greater than 100% is a classic example of it.

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  • “In capitalism a constant exponential expansion of money supply is balanced by constant exponential expansion of GDP and inflation.”

    The latter required by the former which is necessary to cover interest.

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  • You can probably ignore my comment about population expansion if you consider GDP per head for the country instead of raw GDP.

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