Capitalism Fails

[Elldallan]

Well I'd like to clarify a few things before I go on.
I'm not debating this from a purely economic standpoint but from how it would impact a society/nation.

Therefore I'll start with a few points

The government(at least in a democratic nation) is a government of the people, by the people, for the people. Not by the people for economy. And by the people we mean the inhabitants/citizens of that country. Specifically it excludes people anywhere else.

Therefore I claim the following, any action or lack thereof that results in riots and/or uprisings is a failure by the government, because they have failed the people.

While it might make economical sense to let a company fail because some other company will pick up the slack and create more productive jobs, if those jobs are in another nation then the government has failed no matter how much economical sense it makes.


This is why I think bailouts makes because of how banks have intermarried with each other and exchanged securities, if one fail(and is allowed to fail completely) it will make the securities that other banks has with that bank worthless and it will destabilize those banks, and then they risk failing, and so on. Yes banks have acted irresponsibly and I think that those in charge needs to be punished, and punished hard but I don't think that letting a significant part of the people loose their life savings is an acceptable price because these people will not accept that lying down, they'll demand that the government do something about it and if the government fails then either they'll take up arms against the government or they'll elect someone who promises them to act and restore their lost wealth and improve their lives.

The inaction of the German government during the interwar economical crisis was what made the rise of the Nazi regime possible, because they promised the people that they'd fix it(and they did fix quite a bit of it) if they were elected, and they did get elected.

The bailout was never about protecting the grassroots. Why would they bail out their friends and then turn around to punish them.

Of course not. Because the United States has more in common with a Kleptocracy than it does with a Democracy, the wealthy can legally buy politicians and thus whatever laws they please.

Can you honestly say that this policy is a success? Are you going to pay off those debts?

Well luckily I don't have to as I'm Swedish. Yes I think that the US could have handled the economic crisis better and I do think that their national debt is a big problem that certainly won't go away anytime soon.

I just don't understand why it's hard to see this. Somehow people think that banks should not be treated just like any other business. Banks have gone bankrupt for centuries. There is nothing strange or scary about that.

I don't think that banks going bankrupt is the problem, banks going bankrupt is fine, I think the problem here is the massive scale, if a couple of thousand John/Jane Doe loose their life savings because of a bankruptcy that's "fine", if it's 10 million Doe's or more that loose their life savings then that's a problem because they won't accept it quietly and this time there's enough of them to cause serious problems.

The best way to teach investors a lesson is to let them lose money. Not bail them out.

Agreed, I just don't think that even without a bailout that's going to happen. Because lets say that a certain bank that's going bankrupt derives 40% of it's revenue from John/Jane Doe, 15% From big corporation A, 10% from Big company B, 12% from big corporation C, 13% from big company D 5% from small company E and 5% from small company F. And when it fails it has revenues or assets enough to pay 50% of it's debts then the losers will be small company E & F and all the John/Jane Does. The big corporations which also typically are the ones pushing the bank to take ever greater risk just so they can get a better interest rate will still get all their money back. And nobody will have learned a single damn thing, and this will be repeated over and over and over again, because those who have the control takes very little to none of the actual risks.
So until laws are changed so that everybody gets 50% of their debts repaid or that the debts are repaid from the bottom up then this behavior will continue regardless of bailouts or not. But the bailouts will at least protect all the John/Jane Does and small company E&F.
And the government is eventually going to have to protect these Doe's one way or another, either by bailouts or through the social welfare system, the problem is that when people loose their jobs and ends up in the social welfare system a large percent of them usually get stuck there for various reasons and will become a permanent burden for the government.

Yes kicking the can ever onwards will only exacerbate the problem, but I don't think that the problem is the bailouts themselves bit that it's the fundamental construction of the financial system and the rules/laws governing bankruptcy and debt.