If people want to label that as “capitalism” they are dead wrong.
The choice between “people” choosing who gets what resources (capitalism) and “government” choosing who gets what resources (socialism) does not mean that there are no rules and no protections and a complete lack of commons sense.
You don’t “own” up to 50 times what you “owned” in a 4 year period through borrowing and call that capitalism.
You call that people, government and corporations run amock.
They collapsed for a reason. They were borrowing more than they could afford to pay back based on a false premise.
to be fair, that’s a little like all those people who say “communism would work if it were only done right. the soviets perverted communism, etc.” well, yeah. but there’s a reason why communism always gets perverted, namely, that it is ripe for perversion. similarly, i would argue that this was indeed capitalism — capitalism run amok. i think that in general capitalism has a far better track record than communism, but it is particularly vulnerable to exactly this sort of perversion: bubbles and manias and wild speculation. it happens from time to time. you can’t say it’s not capitalism.
I would tend to agree with Alex. I seldom use the word “capitalism” now, preferring to think in general free market terms rather than a specific theory of ownership. The point free marketers make is that the market will eventually work whether we believe in its power or not. It is a description of how economics does work, not how it should. No actual system in place is a pure anything. The Swedes, for example, are quite redistributive within their own borders but ruthless free marketers with other countries.
Actual systems can be gamed temporarily, whatever they are. Socialism may indeed be good at discouraging manias, which would be a short-term plus. That socialistic Iceland would fall prey to manias might be evidence against that, but like the Swedes, they play by free market rules internationally. Everyone does.
The analogy to mania holds up well: hypomanic people are lots of fun – creative, witty, impulsive. Fully manic people are destructive. The natural optimism and bouyancy of some people is part of what makes for wealth creation. Taken too far, it becomes destructive. Socialism advertises itself as a system that prevents full mania, but in practice it squelches hypomania as well, preventing wealth creation and progress.
It all comes down to excessive greed. Oddly enough if the banks had been methodical and willing to grow slowly they could have weathered the storms.
And the people let themselves be sucked in to it.
Well,
In what free market system would somebody LEND to a BORROWER freely 50 times more than they could afford?
It got up to 850 percent of GDP.
Here in America it is up to 350 percent of GDP.
With our GDP shrinking and our borrowing growing…..
and the socialist policies urging and forcing people into more debt…
You can’t call that the free market (or capitalism).
I call it corrupt government policies.
Come on. You’re saying that people need a government to force them to borrow too much? That no one would lend to such a crazy person? I wish you were right.
Incidentally, that “50 times too much” figure you’re quoting doesn’t mean what you seem to think it does. The article says Icelanders in 2007 owned 50 times more foreign assets than they did in 2002. How excessive this is depends entirely on how many foreign assets they owned in 2002. You seem to imply that they were borrowing to the limit of their capacity in 2002, which was probably not the case. Remember that Iceland was fairly financially provincial before all this. Anyhow, it is certainly true that they borrowed way too much, but it’s not clear that it was “50 times” too much.
Sigh,
Folks, bubbles, panics, manias and other economic and financial crises are not features specific to capitalism or free markets nor wholly divorced from them.
History is chock full of catastrophies striking down all sorts of economic systems. In the 20th century alone we’ve seen hyper-inflation, deflation, market failures, massive currency devaluations and near total economic collapse strike down mixed market economies, social democratic systems, quasi-fascist states, military juntas, command economies, directed market economies… etc and of course relatively free markets as well.
It is silly to argue that recessions and panics would never happen in a “pure” free market system, we do call the cycle of booms and recessions the “business” cycle after all.
It is however even sillier to argue that the financial bubble wouldn’t have occurred if only we were more like one of the directed market economies of Europe, or any of the state controlled systems that seem to work ever harder at falling further behind every year.
Greed, stupidity and shortsightedness afflict all humanity in roughly equal proportions, not just free marketeers. With democracy and relatively free markets we just get to divide up the decision making such that we are mostly responsible for our own money and property. We don’t end up with a (greedy, stupid, shortsighted)cabal or tyrant steering everyone in one direction thus making the whole economy one big bubble of malinvestment.
Alex, That isn’t what I said.
It isn’t in anybody’s interest to borrow to much or lend too much.
It’s a suspension in common sense and I don’t blame the “rich” or the “greedy bankers”.
I blame all parties.
Alex wrote, “The article says Icelanders in 2007 owned 50 times more foreign assets than they did in 2002”
I’m not stupid Alex. I know what the article said. If a perfectly stable economy based on fishing within a few years owns 50 times more than in 2002 – I feel FULLY ABLE to make the statement I made without derision from you.
They borrowed 50 times too much. ALL PEOPLE involved are to blame.
The key here.
Socialism is not the answer. Socialism and communism destroy the creative spirit and keeps people down. When everyone makes the same wage regardless of effort – everyone decides to give less and less effort.
If there is reward in risk and work – there is more productivity, more work and more risk took.
It is not ok for any set of “rules” to allow somebody to borrow more than they could afford to pay back in 30 years.
If one monkey allows another monkey to “borrow” 2,000 bananas – to be paid back with interest (4,000 bananas over 30 years)….
that borrowing monkey better have a means of paying it back. There needs to be a set of rules:
1) like credit scores
2) like debt to asset ratios
3) like income declarations and paystubs
What Iceland did is horrible. It wasn’t based on any economic common sense.
And guess what Venezuela is going through bad times right now:
1) 30% inflation
2) massive price controls being levied by Hugo
3) Huge government deficits (his budget is based on $60 per barrel and the price is $40.)
4) Many more problems.
Bubbles and stupid decisions are not deleted by government control. They are only changed.
If a perfectly stable economy based on fishing within a few years owns 50 times more than in 2002 – I feel FULLY ABLE to make the statement I made without derision from you.
Not to beat a dead horse here, but Icelanders didn’t own “50 times more” in 2007 than in 2002, they owned 50 times more foreign assets. Thought experiment: suppose each person in Iceland owned $1 in foreign assets in 2002. There is a big difference between multiplying total assets by 50, and multiplying one subcategory of assets by 50, especially when that subcategory may have been quite low to start with!
I caught that word Alex.
Whatever….
I’m sooooooo convinced !!!
Problem with your math is that they were in debt at 850% of GDP..
So it wasn’t a $1.
Accepting apologies 🙂 he he
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Long read.
That…. was anarchy.
If people want to label that as “capitalism” they are dead wrong.
The choice between “people” choosing who gets what resources (capitalism) and “government” choosing who gets what resources (socialism) does not mean that there are no rules and no protections and a complete lack of commons sense.
You don’t “own” up to 50 times what you “owned” in a 4 year period through borrowing and call that capitalism.
You call that people, government and corporations run amock.
They collapsed for a reason. They were borrowing more than they could afford to pay back based on a false premise.
to be fair, that’s a little like all those people who say “communism would work if it were only done right. the soviets perverted communism, etc.” well, yeah. but there’s a reason why communism always gets perverted, namely, that it is ripe for perversion. similarly, i would argue that this was indeed capitalism — capitalism run amok. i think that in general capitalism has a far better track record than communism, but it is particularly vulnerable to exactly this sort of perversion: bubbles and manias and wild speculation. it happens from time to time. you can’t say it’s not capitalism.
I would tend to agree with Alex. I seldom use the word “capitalism” now, preferring to think in general free market terms rather than a specific theory of ownership. The point free marketers make is that the market will eventually work whether we believe in its power or not. It is a description of how economics does work, not how it should. No actual system in place is a pure anything. The Swedes, for example, are quite redistributive within their own borders but ruthless free marketers with other countries.
Actual systems can be gamed temporarily, whatever they are. Socialism may indeed be good at discouraging manias, which would be a short-term plus. That socialistic Iceland would fall prey to manias might be evidence against that, but like the Swedes, they play by free market rules internationally. Everyone does.
The analogy to mania holds up well: hypomanic people are lots of fun – creative, witty, impulsive. Fully manic people are destructive. The natural optimism and bouyancy of some people is part of what makes for wealth creation. Taken too far, it becomes destructive. Socialism advertises itself as a system that prevents full mania, but in practice it squelches hypomania as well, preventing wealth creation and progress.
It all comes down to excessive greed. Oddly enough if the banks had been methodical and willing to grow slowly they could have weathered the storms.
And the people let themselves be sucked in to it.
Well,
In what free market system would somebody LEND to a BORROWER freely 50 times more than they could afford?
It got up to 850 percent of GDP.
Here in America it is up to 350 percent of GDP.
With our GDP shrinking and our borrowing growing…..
and the socialist policies urging and forcing people into more debt…
You can’t call that the free market (or capitalism).
I call it corrupt government policies.
Come on. You’re saying that people need a government to force them to borrow too much? That no one would lend to such a crazy person? I wish you were right.
Capitalism and leveraged investing have long been good friends. Take a look at this:
http://en.wikipedia.org/wiki/File:Leverage_Ratios.png
Incidentally, that “50 times too much” figure you’re quoting doesn’t mean what you seem to think it does. The article says Icelanders in 2007 owned 50 times more foreign assets than they did in 2002. How excessive this is depends entirely on how many foreign assets they owned in 2002. You seem to imply that they were borrowing to the limit of their capacity in 2002, which was probably not the case. Remember that Iceland was fairly financially provincial before all this. Anyhow, it is certainly true that they borrowed way too much, but it’s not clear that it was “50 times” too much.
Sigh,
Folks, bubbles, panics, manias and other economic and financial crises are not features specific to capitalism or free markets nor wholly divorced from them.
History is chock full of catastrophies striking down all sorts of economic systems. In the 20th century alone we’ve seen hyper-inflation, deflation, market failures, massive currency devaluations and near total economic collapse strike down mixed market economies, social democratic systems, quasi-fascist states, military juntas, command economies, directed market economies… etc and of course relatively free markets as well.
It is silly to argue that recessions and panics would never happen in a “pure” free market system, we do call the cycle of booms and recessions the “business” cycle after all.
It is however even sillier to argue that the financial bubble wouldn’t have occurred if only we were more like one of the directed market economies of Europe, or any of the state controlled systems that seem to work ever harder at falling further behind every year.
Greed, stupidity and shortsightedness afflict all humanity in roughly equal proportions, not just free marketeers. With democracy and relatively free markets we just get to divide up the decision making such that we are mostly responsible for our own money and property. We don’t end up with a (greedy, stupid, shortsighted)cabal or tyrant steering everyone in one direction thus making the whole economy one big bubble of malinvestment.
Alex, That isn’t what I said.
It isn’t in anybody’s interest to borrow to much or lend too much.
It’s a suspension in common sense and I don’t blame the “rich” or the “greedy bankers”.
I blame all parties.
Alex wrote, “The article says Icelanders in 2007 owned 50 times more foreign assets than they did in 2002”
I’m not stupid Alex. I know what the article said. If a perfectly stable economy based on fishing within a few years owns 50 times more than in 2002 – I feel FULLY ABLE to make the statement I made without derision from you.
They borrowed 50 times too much. ALL PEOPLE involved are to blame.
The key here.
Socialism is not the answer. Socialism and communism destroy the creative spirit and keeps people down. When everyone makes the same wage regardless of effort – everyone decides to give less and less effort.
If there is reward in risk and work – there is more productivity, more work and more risk took.
It is not ok for any set of “rules” to allow somebody to borrow more than they could afford to pay back in 30 years.
If one monkey allows another monkey to “borrow” 2,000 bananas – to be paid back with interest (4,000 bananas over 30 years)….
that borrowing monkey better have a means of paying it back. There needs to be a set of rules:
1) like credit scores
2) like debt to asset ratios
3) like income declarations and paystubs
What Iceland did is horrible. It wasn’t based on any economic common sense.
And guess what Venezuela is going through bad times right now:
1) 30% inflation
2) massive price controls being levied by Hugo
3) Huge government deficits (his budget is based on $60 per barrel and the price is $40.)
4) Many more problems.
Bubbles and stupid decisions are not deleted by government control. They are only changed.
If a perfectly stable economy based on fishing within a few years owns 50 times more than in 2002 – I feel FULLY ABLE to make the statement I made without derision from you.
Not to beat a dead horse here, but Icelanders didn’t own “50 times more” in 2007 than in 2002, they owned 50 times more foreign assets. Thought experiment: suppose each person in Iceland owned $1 in foreign assets in 2002. There is a big difference between multiplying total assets by 50, and multiplying one subcategory of assets by 50, especially when that subcategory may have been quite low to start with!
I caught that word Alex.
Whatever….
I’m sooooooo convinced !!!
Problem with your math is that they were in debt at 850% of GDP..
So it wasn’t a $1.
Accepting apologies 🙂 he he