The free market version of capitalism is a system where free individuals develop and invest their resources. The successful investor gradually builds up capital through the evolutionary process of analyzing the returns from their investment and making course adjustments as needed.
Federal Reserve and banking system seems to have created something entirely different from capitalism. This bastardized creation might better be called creditism.
While free market capitalism starts with the resources of free rational people making decisions on how best to use their resources, creditism starts with a centralized authority (in the US, this is the Federal Reserve). The reserve banks lend out money to regional banks at fixed interest. The regional banks then lend out money to other banks or corporations at a slightly higher rate, or they lend to individuals at a much higher rate.
In capitalism, the investor is confronted immediately with the fluid nature of the market. Investors in the real world know that there is no such thing as a guaranteed return on any investment.
The financial institutions caudled in through this process expect a guaranteed return for their investments. Financial institutions in this strange controlled creditist market fall into crisis mode at the first gust of market turbulence.
The thin skin of financial institutions in a creditist world is problematic. As you see, creditism tends to create systemic faults in the economy.
My last post on leverage indicates that people will leverage against the regulations in a system until the regulations crack. In a creditist system, large numbers of people will fall into the pattern of pushing credit to its limit.
When a large number of people in the credit market are fully extended, then turbulence in the credit market will result in a cascading collapse of the financial system.
5 comments:
Capitalism to Creditism - and even how the moral hazard of social responsibility was over come - it was a great theory when I first came-up with it. http://citation.allacademic.com/meta/p_mla_apa_research_citation/1/1/0/1/2/pages110123/p110123-1.php
Odd, it seems even though I have been working on this theory for some eight year now and written a lot about it.., and presented it all over the place, not one person wants to ask me about how it really works or what is going to happen next. Guess there are more important things than just being right for eight year?
The stuff is all over the Hispavista website as well, when i tried to post stuff in the spanish language countries
By the way, I presented the Credit Economy formula at the California Sociological Association Conference, and the Global Studies Association, and the American Sociological Association in 2004 as well, even presented how the Credit Expansion Economies had reached the limits of their expansion.... submitted the papers for review in the Fall of 2003
http://foros.hispavista.com/quantum_aesthetics_forum/265/36141/m/creditism/
Looks like Morales has been doing this for a long time - in Spanish as well
"Global Credit Economy" (Morales, GSA, ASA, and CSA 2004) http://www.net4dem.org/mayglobal/Papers/Conference2004Papers/GregoryMorales.pdf
http://www.net4dem.org/mayglobal/Papers/Conference2004Papers/GregoryMorales.pdf
Here is part of the Abstract from that first poorly written work in Creditism and the global credit economy. Why was this guy not noticed?
"The dangers of credit use and expansion have been suggested through the works of authors and playwrights for thousands of years. In sources ranging from the Christian Bible to more recent works such as David Harvey’s “The New Imperialism” these warnings about credit have been clearly stated. Countries participating in the Global Economy, even those with comparative skills, like technologies, and natural endowments enjoy different level of access to world credit markets. These uneven conditions have been brought about by a new Imperialist Credit Culture, which has taken root and is hidden in the imperfections of the once powerful capitalist economic system. In this work the source of control will be refer to as the International Credit Consortium (I.C.C.); this I.C.C. while avoiding any risk of association for the “Moral Hazard” (“Moral Hazard” Horkheimer/Adorno) of:
(1) involving labor markets of periphery and simi- periphery
(2) Economic systems - behind a vale of international cooperation.
The World Trade Organization (W.T.O.) supports a disassociation of human/world culture responsibilities for those countries, each counties, populations are only the responsibility of their domestic governments and not the ICC even though use of labor and commodity resources are gathered and used by these multinationals removing power and economic influences from local governments and populations. The Consumer market of the United States - “The Core Economy” (The Capitalist World-Economy Immanual Wallerstein: 1979), which is now based upon consumption value and not labor value of the individuals in this market place – serves only as a source of credit value and neither collects real-values of capital nor production at any level."
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