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Crony capitalism is real, and it’s part of the real problem.


I think capitalism, restrained by laws applied equally to all, has many beneficial aspects.  If it were not for the crony capitalism and our captured legislators, maybe we could be going through the deflationary period of creative destruction that our system so needs.. rather than heading full speed toward a much bigger cliff.

Jesse says it best I think in a recent post;

“I cannot say it more simply or more emphatically, that the gaming of the system by the monied interests, marked by but not wholly due to the repeal of Glass-Steagall, the trade agreement with China without a floating exchange rate, and the Bush tax cuts for the wealthy while initiating aggressive war on multiple fronts, have set the American economy on a spiral of demise and eventual self-destruction.

What has institutionalized this demise and made it pernicious is the corruption of American power and distortion of thought by big money, and the short term selfishness and self-interest of the status quo. That is what I call the credibility trap.”

source:  http://jessescrossroadscafe.blogspot.com…

and see this related post;

“Unequal enforcement of the law will distort and destroy any capitalist society, and we may be witnessing just such a downward spiral in the financial sector.

Capitalism is not an abstract idea. It is an economic system with a distinct set of underlying principles that must exist in order for the system to work. One of these principles is equal justice. In its absence, parties will stop entering into transactions that create overall wealth for our society. Justice must be blind so that both parties — whether weak or powerful — can assume that an agreement between them will be equally enforced by the courts.

There is a second, perhaps even more fundamental, reason that equal justice is essential for capitalism to work. When unequal justice prevails, the party that does not need to follow the law has a distinct competitive advantage. A corporation that knowingly breaks the law will find ways to profit through illegal means that are not available to competitors. As a consequence, the competitive playing field is biased toward the company that does not need to follow the rules.

The net result of unequal justice is likely to be the destruction of the overall wealth of our society. I don’t mean the wealth of individuals; I mean the total wealth of goods and services that are the benefits of healthy competition. To the extent that unequal justice prevails, entities that are exempt from the laws will, in all likelihood, be more profitable than law abiding competitors. Then they use their profits to further weaken competitors by using their illegal profits to further build their businesses at the expense of competitors. All of this business building activity is based on a foundation of sand, and ultimately the entire industry — or even the larger economy — becomes distorted. The “rogue” company gains power, changes markets, and destroys direct and indirect competitors because it is playing by different rules.”

see the rest at the link.. a great piece in my opinion.

 

source:  http://www.nextnewdeal.net/capitalism-su…

 

I want to be clear that I am not defending our debt-based fiat money system along with Capitalism.  Darbikrash has this to say about the pre-FED era of non-intervention;

“To be thorough, it must be said that the contemporary narrative seeks to explain these events by blaming government intervention, but these claims fall apart when we extend the historical timeline to the era before the 1913 Federal Reserve Act and the initiation of federal income tax. Many historians will tell you that the government was simply too small to impart any influence on commerce in the pre-Civil War years, yet this was a particularly active time for economic crises. ”

But my own personal hero, James Grant, has this to say, speaking of the Gold standard in his recent criticism of the hyper-interventionist FED – see how the highlighted comment directly contradicts Darbi’s premise above;

“Notice, I do not say the perfect monetary system or best monetary system ever dreamt up by a theoretical economist. The classical gold standard, 1879-1914, “with all its anomalies and exceptions . . . ‘worked.’” The quoted words I draw from a book entitled, “The Rules of the Game: Reform and Evolution in the International Monetary System,” by Kenneth W. Dam, a law professor and former provost of the University of Chicago. Dam’s was a grudging  admiration, a  little like that of the New York Fed’s own Arthur Bloomfield, whose 1959 monograph, “Monetary Policy under the International Gold Standard,” was published by yourselves. No, Bloomfield points out, as does Dam, the classical gold standard was not quite automatic. But it was synchronous, it was self-correcting and it did deliver both national solvency and, over the long run, uncanny price stability. The banks were solvent, too, even the central banks, which, as Bloomfield noted, monetized no government debt.

The visible hallmark of the classical gold standard was, of course, gold—to every currency holder was given the option of exchanging metal for paper, or paper for metal, at a fixed, statutory rate. Exchange rates were fixed, and I mean fixed. “It is quite remarkable,” Dam writes, “that from 1879 to 1914, in a period considerably longer than from 1945 to the demise of Bretton Woods in 1971, there were no changes of parities between the United States, Britain, France, Germany—not to speak of a number of smaller European countries.” The fruits of this fixedness were many and sweet. Among them, again to quote Dam, “a flow of private foreign investment on a scale the world had never seen, and, relative to other economic aggregates, was never to see again.”

Source:  http://www.zerohedge.com/news/must-read-…

 

Jim

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