Posted on 09/15/2012 8:33:12 AM PDT by RicocheT
The truth is a casualty in almost any election. But perhaps especially this year due to the tightness of the presidential race.
However, it's not just the candidates getting tarred and feathered by political bombast, heavy-handed rhetoric, and over-the-top political ads. It's the free-enterprise system itself.
If you've paid any attention at all this year, you've heard four things:
Wall Street caused the financial crisis Capitalism hurts the poor and middle class Markets are driven by selfishness and greed, and The free-enterprise system is inherently unfair
This is a troubling development, one that has serious implications for our economic future and your investment portfolio. So let's take a closer look at these claims.
Are Wall Street firms responsible for the financial crisis? In part, yes. CEOs Jimmy Cayne of Bear Stearns, Dick Fuld of Lehman Brothers, and Hank Greenberg of AIG all failed to understand the huge risks their firms were taking. Shareholders and employees suffered mightily as a result. There was plenty of collateral damage, too.
But these business leaders – and others like them – aren't solely to blame. Politicians on both sides of the aisle spent years weakening lending laws to allow almost anyone to buy a home whether they could afford one or not. The Federal Reserve took interest rates too low for too long, making mortgages dirt-cheap and priming the real estate bubble. And plenty of Americans got caught up in the hoopla, and figured they could get rich in a hurry by flipping a house using borrowed money they couldn't reasonably repay. There is plenty of blame to go around.
Capitalism hurts the poor and middle class? Nothing could be further from the truth. Hundreds of millions around the world have been pulled out of poverty by the free-enterprise system. The evidence of history is clear. There is nothing that creates prosperity like capitalism. Have "the 1%" benefited more than most? Yes, but not because they somehow cheated the rest of us. Over the past 100 years, the U.S. has evolved from an agricultural economy to a manufacturing economy to a knowledge economy. Those with higher education and more technical skills are in greater demand.
This is a particularly nasty downturn, but when the economy recovers – as it will – demand for all sorts of jobs will increase. In the meantime, how do you raise up the wage earner by pulling down the wage payer? As a young man, I worked maintenance on a truck terminal, the night shift in an auto-parts warehouse, and a lot of other unglamorous, low-paying jobs for high-net-worth individuals. Yet never in my wildest dreams did I believe that sticking it to them would somehow benefit me.
The idea that markets are driven by greed is another misnomer. When does self-interest become greed? And who – in a free society – should tell you when you have enough?
Of course, it's never you or me who is greedy. It's always the other guy. The truth is, all markets are driven by rational self-interest. This is "the invisible hand" organizing society that Adam Smith praised more than two centuries ago. In The Wealth of Nations, he said, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."
There is nothing the least bit immoral about this. Free markets are about voluntary exchange for mutual benefit. Capitalism promises that you can have anything you want if you just provide enough other people with what they want.
But is the free-enterprise system unfair? It is undeniable that the rewards of capitalism are unevenly distributed. And some income redistribution is necessary to pay for the state and to finance a social safety net for the needy. But let's also talk about the fairness of keeping the fruits of your labor. If the top federal income tax rate returns to 39.6% and you add in the average state income tax of 6%, plus Medicare and Social Security taxes, the government will take over 50% of many entrepreneurs' income.
When you start or expand a business, you are taking a risk, one that could generate a loss for which you are solely responsible. But if you work hard or smart (or both) and are successful, is it fair for the government to take most of what you earn? (And that's before sales taxes, property taxes, sin taxes, and so on.) I don't believe that's the kind of republic the Founders had in mind when they pledged their lives, their fortunes, and their sacred honor in what was largely a tax revolt against the king.
I mention these widespread misconceptions because if you truly believe the economic system is rigged, financial markets are unfair, and Wall Street is corrupt, why invest? And if we don't have a dynamic, growing economy to throw off hundreds of billions in tax revenue, where will we get the money to pay for essential government services?
I understand why candidates in both major parties are under attack, but I don't get the hostility toward the free-enterprise system itself. What do we do after we strangle the goose that lays the golden eggs?
Good investing,
Alex Green
Well, if you listened to those in March who said the same thing, and threw your money in gold instead, you made a lot less money over the past 6 months.
Of course, tomorrow everything could change. The problem is that the market doesn’t do what you expect it to do, it does what humanity expects it to do. You either do fundamentals, or you try to guess what humanity is thinking.
Absolutely true.
The problem is, we've developed into a system of corporate fascism which is horrible for the middle class.
I wish we would try capitalism someday.
Truth...yes, indeed.
A site, http://www.oftwominds.com/blog.html has a current piece on why we need a new stock market, and has an earlier piece on organized financial crime as the new normal: http://www.oftwominds.com/blogjuly12/white-collar-crimeB7-12.html
Both articles compliment this piece in regard to the question...Why Invest?
Yeah I wish we still did the free market thing.
“Investing” in market is not a winning proposition. Forget about buy and hold strategies. That won’t work anymore because of bifurcating government policies.
OTOH Trading the market can pay big dividends. One can lose money in a “good” company and make money in a lousy company if the trade timing is right.
The problem, is that things like Corzine and MF Global are unpunished, and are often rewarded. Client accounts were raided to cover the company debts in its imminenet collapse.
This is outright theft. Things like this are what make people extremely cautious and no longer willing to quote Adam Smith as they invest freely.
Like it or not, investing today is not the same thing as investing a few decades ago. That was largely a capitalist market.
Todays market is so deeply wrapped in fascist relationships with government that it has become very deadly for normal people who don’t have that “in”.
Do you open a customer account at MF Global, safe in the knowledge that theft will be prosecuted? Better not if democrat darling Corzine is in charge.
GS pushed mortgage backed securities as great investiments that they knew were total garbage, and made immense bets against the very product they were pushing hard to their “customers”. They did fine, customers lost all, government said GS did nothing wrong.
GE has fed like a pig on government, rewarded for political support. The GE relationship to Obama will be written aboit in 50 years as pure graft/bribery/kickbacks.
And how would you love to have been a bondholder for GM? They were openly cheated in the bankruptcy payout hierarchy.
The law clearly has them ahead of the unions. These and more are what is eroding the trust in wall street.
It takes more than a few classic quotes on capitalism to make people feel that there is any trust to be found between them and wall street today.
If you love capitalism, then the attacking the government/business “partnership” is where you should aim your guns. Not at sane people who correctly assess that the game has changed.
Whoever has money to invest will figure that out.
And you gloss over “politicians weakening laws” as if they existed in a vacuum. The banks practically wrote half those laws. Even the ones they supposedly hated like subprime.
The authors of those bills are the deepest in the pockets of the banksters.
They got rich on subprime, and though there was a “collapse” it didnt affect them, the US Govt bailed them out. (as per the “deal”)
Flush with TARP funds, they could pretend their banks were doing well as though it had occurred in the marketplace, and got even bigger bonuses.
Dodd and his VIP Mortgages, Barney Frank, etc.
A strong argument can be made that Obama was created by wall street, and Hillary was defunded, for the sole purpose of protecting them from any consequences of collapse.
Obama is their boy.
And you gloss over “politicians weakening laws” as if they existed in a vacuum. The banks practically wrote half those laws. Even the ones they supposedly hated like subprime.
The authors of those bills are the deepest in the pockets of the banksters.
They got rich on subprime, and though there was a “collapse” it didnt affect them, the US Govt bailed them out. (as per the “deal”)
Flush with TARP funds, they could pretend their banks were doing well as though it had occurred in the marketplace, and got even bigger bonuses.
Dodd and his VIP Mortgages, Barney Frank, etc.
A strong argument can be made that Obama was created by wall street, and Hillary was defunded, for the sole purpose of protecting them from any consequences of collapse.
Obama is their boy.
And you gloss over “politicians weakening laws” as if they existed in a vacuum. The banks practically wrote half those laws. Even the ones they supposedly hated like subprime.
The authors of those bills are the deepest in the pockets of the banksters.
They got rich on subprime, and though there was a “collapse” it didnt affect them, the US Govt bailed them out. (as per the “deal”)
Flush with TARP funds, they could pretend their banks were doing well as though it had occurred in the marketplace, and got even bigger bonuses.
Dodd and his VIP Mortgages, Barney Frank, etc.
A strong argument can be made that Obama was created by wall street, and Hillary was defunded, for the sole purpose of protecting them from any consequences of collapse.
Obama is their boy.
The truth is that the last thing Wall street wants today is actual capitalism. They want access to the treasury by pulling the levers of government, and to call THAT capitalism.
It’s “capitalism theater”, not capitalism. Capitalism demands an expectation that laws will be applied equally. This way everyone knows the rules. Now the rules are clearly that political favor easily outweighs any law or court.
This would all be fine if we were a capitalist country, but the Federal Reserve now runs the show and rigs the market.
Clear when it is explained, but it is not intuitively understandable People without knowledge will inevitably come to the conclusion that they prefer to be governed by a strong tribal chief who wil take stuff away from their enemies and give it to them.
Maybe I'm not in possession of the full facts, but I seem to recall that the huge exposure in AIG ramped up after Spitzer managed to force Greenberg out. From which I drew the conclusion that Greenberg was holding things in check, and quite probably the Spitzer investigation was supported by insiders who wanted to be in the driver's seat.
Even worst, Goldman Sachs was asked by the Greek gov to cook the budget books so they can qualify entry into the EU. GS was willing to comply because they were the ones that were going to sell the Greek bonds and collect the fees and commissions. GS knew the Greek gov was lying to the EU for membership and they helped them do that.
Old ancient saying - “Merchant class is important to kingdom because they generate vast wealth from a few. Wise king will always keep and eye on them, because they are capable of cheating the people and corrupting officials.”
BTTT
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.