Some of the phrases that I learnt from the great depression commencing Sept. 08:
a) "Unfettered capitalism is dead , but crony capitalism is alive and kicking ."
b) Capitalism cannot be killed , it can however self destruct by greed and avarice.
c) The prevailing version of capitalism that Milton Friedman propagated and previous Fed Chairman Paul Volcker turned into official policy posited that minimal regulation and easy money supply could spur infinite growth.After the end of the cold war , over zealous failth in capitalism led the west to discard many of the regulationss on raw market forces.This has boosted global growth - nay for a while.Over time , wall street's greed and unchecked power turned unfettered capitalism into crony capitalism.And at every turn , US financial policy has been twisted to suit the demands of Wall Street.But markets , like water find their own level.The 700 billion dollar bailout programme is the worst kind of corporate welfare programme that the Govt has embarked on.The heads of banks and wall street that created the crisis in the first place have got the bulk of this largesse.Ordinary US citizens - struggling to make payments on their home loans and facing large scale unemploement have got peanuts .
d) A bailout is not a feasible solution as we are funding those who have created this mess in the first place. Second it sends a wrong message , that recklessness and unwaranted aggression in selling complex financial instruments will always be "bailed out" by the state in event of failure.
e) Presently no fin insti. in US is willling to lend because of the risk of not being repaid.
f) In the roaring 1920s , unfettered capitalism led to the Great Depression which in turn led to then US president Roosevelt to introduce regulation of the fin. system ( as well as the social security system). The lynch pin was The GSA ( the Glass Stegall Act ) which separated comm banking from Investment banking. The Act broke down the House of Morgans into two halves , Morgan Stanley the investment bank and JP Morgan as the commercial bank.
