Capitalistic Economy
April 22, 2013
Extra Credit Term Paper – Topic 1 The main concept behind a capitalistic economy is that the government does not have any control over the free markets. For this to exist, the economic markets should not be allowed to receive (nor should they be allowed to give) monetary support from the government. In 2007 the banking, financial, and insurance industry corporate giants claimed to be “to big to fail” and pled for a bailout from the U.S. government. Adam Smith, a moral philosopher and a pioneer of political economy once stated, “as soon as government management begins it upsets the natural equilibrium of industrial relations, and each interference only requires further bureaucratic control until the end is the tyranny of the totalitarian state.”1 In the summer of 2007, the biggest economic crisis since the Great Depression in 1929 shocked the nation. The crisis was triggered by the U.S. subprime mortgage problem in which financial institutions would agree to subprime mortgage loans. These practices lead to thousands of defaults on mortgages and foreclosures. The defaults and foreclosures lead to a decline in securities that were backed by the said mortgages. These events snowballed to the point where the banking and insurance institutions collapsed. Will the global economic crisis change the principles and ideas of capitalism that have been enshrined for many years? Economists are split on the debate of what will happen in the coming years for the United States economic system. I believe that the principles and ideas of capitalism, free markets, and laissez-faire will never change as they are defined in history, however, I believe the argument that the United States may eventually go bankrupt and government and the economy as we know it would seize to exist. PhD economist Marc Faber, who accurately predicted the 1987 crash as well as the economic collapse of 2008, believes that the government of the United States of America are
Extra Credit Term Paper – Topic 1 The main concept behind a capitalistic economy is that the government does not have any control over the free markets. For this to exist, the economic markets should not be allowed to receive (nor should they be allowed to give) monetary support from the government. In 2007 the banking, financial, and insurance industry corporate giants claimed to be “to big to fail” and pled for a bailout from the U.S. government. Adam Smith, a moral philosopher and a pioneer of political economy once stated, “as soon as government management begins it upsets the natural equilibrium of industrial relations, and each interference only requires further bureaucratic control until the end is the tyranny of the totalitarian state.”1 In the summer of 2007, the biggest economic crisis since the Great Depression in 1929 shocked the nation. The crisis was triggered by the U.S. subprime mortgage problem in which financial institutions would agree to subprime mortgage loans. These practices lead to thousands of defaults on mortgages and foreclosures. The defaults and foreclosures lead to a decline in securities that were backed by the said mortgages. These events snowballed to the point where the banking and insurance institutions collapsed. Will the global economic crisis change the principles and ideas of capitalism that have been enshrined for many years? Economists are split on the debate of what will happen in the coming years for the United States economic system. I believe that the principles and ideas of capitalism, free markets, and laissez-faire will never change as they are defined in history, however, I believe the argument that the United States may eventually go bankrupt and government and the economy as we know it would seize to exist. PhD economist Marc Faber, who accurately predicted the 1987 crash as well as the economic collapse of 2008, believes that the government of the United States of America are