I was sold on blaming the Banks and Financial Institution for causing the financial crisis comparable to the 1930 economic crash. These institutions had granted mortgages to buy houses and loans to buy goods to people who could not afford to pay back the money. The lenders made breath-taking profits whilst the going was good and that is why they are now being accused of greed.
And greedy they were, make no mistake about that, but it was not entirely they fault. Western governments aided and abetted them in this.
It was the US government policy that Wall Street, US Financial hub, grant mortgages to people with no steady jobs, poor financial history and who, if the normal Capitalist system rules were applied, would not get such mortgages.
The US Federal Bank kept the interest rates artificially low in its drive to keep inflation within a certain band. This made borrowing cheap allowing individuals to accumulate huge debts. Again, market forces of a health Capitalist system would not have allowed this distortion to last.
Other Western Government implemented similar policies of their own. And even where a particular country did not have such reckless policies, that did not stop their financial institution joining in the bonanza in the US. Past experience had taught Capitalist Institution that they should spread the risk so the Banks were selling these dodgy portfolios to other Banks within their own country and to other Western countries.
As long as everyone pretended investments were sound, everything was fine. But, as usual, there is always the smart Alec who will point out that the Emperor is in fact naked and the whole thing collapses like a house of cards. Everyone then tries to off load the dodgy portfolios, account holders will want to withdraw all their money from a Bank with the dodgy portfolios, etc.
The question then was the financial crisis signifies the death of Capitalism and free market economy? The answer is no. It was government interference in the normal functioning of Capitalism and free market that cause the crisis.
Is the partial nationalising of the West’s financial institution spell the end of free market and capitalism in these institutions? Again the answer is no; all Western Democracy have underlined that this was only a temporary measure.
If the Western Governments had not stepped in and instead allowed free market forces to operate; many Banks and other financial institutions would have certainly gone under. Since these institution play such a pivotal role in the running of all the other sectors in a capitalist system it is clear that many other institutions in the private and public sector would too have gone under, That would well have been the death knell of Capitalism.
It is interesting to note that it was the interference by Western democracies with the normal operation of the free market system that caused the financial crisis and threatened Capitalism, Free market, Democracy and all that the West stand for. It is right that the West should interfere again to save Capitalism.
People will theorise on the causes of the recent financial crisis, argue on measures used to solve the crisis, debate on what worked and what did not work and so forth for generations to come. But the one thing they will agree on, however, is that Capitalism, Free Market, and Democracy have all emerged out of this crisis leaner, meaner, stronger and wiser. They always do!
Capitalism, like the political system that spawned it, Democracy, has built into its very DNA the ability to learn from past mistakes. Capitalism can evolve and adapt, that is why it will never die.
On the other hand, Command Economy, like the myriad of political systems that spawned it- Socialism, Communism, Fascism, etc.-, would go to ridiculous lengths to hide its failings rather than admit them. It can not evolve and adapt; in that lays its self-distract gene!
In every country where the Command Economy has been tried it has hardly survived for more than one or two generations. And in almost all these countries millions of human beings had to be sacrificed in terms of economic hardships their had to face and some cases people paid with their lives to appease the Marxist Demons!
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