Death of Capital - MUST READ!

MezzKet's picture
Rank: Gorilla | 676

This is an extremely well written op-ed piece (intro by John Mauldin, body by Michael Lewitt).

An extract from the body which in economic terms really cuts down to the fundementals and is something I think is EXTREMLEY relevant to the superficial ideology that floats around this board.

The quote is from Adam Smith, who is best known as the author of the bible of capitalism, The Wealth of Nations, but who wrote an equally important book two decades earlier entitled The Theory of Moral Sentiments. Smith wrote the following:

"This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect, persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments."

What Adam Smith pointed out more than two hundred years ago is equally true today - our society, fed by the media, worships wealth at the expense of other values that are far more important to a cohesive and healthy society. The entire mission of The Wealth of Nations was to try to recognize man for what he is - a social animal who is reliant on the good opinions of his neighbors - and to develop the optimal economic system to harness that human essence for the good of all mankind. Smith believed that system was a free market, and history has by and large proven him correct. But the United States has strayed from a free market model to a system that privatizes gains and socializes losses.

http://www.investorsinsight.com/blogs/john_mauldin...

Comments (7)

May 11, 2010

Yeah, the guy's a genius - tax the shit out of everything, red tape and regulate it to death and capitalism will blossom once again. What a moron.

May 11, 2010

Clearly, I mean the HCM co-founders who wrote the article were the original team that worked with Milken and Leon Black @ Drexel in the High Yield boom days... They've got no idea about what gung-ho, unregulated capitalism is, tandaradei and his many years of experience do...

May 11, 2010

I love retards who writes "Death of Capital", "the End of Capital", etc, as to make their article more interesting to read. Capitalism is not going away retard.

May 11, 2010

That's precisely why it's NOT called the "Death of Capitalism" you idiot... "Capital" which if you bothered to read the article was explicitly defined... Nowhere is capitalism even mentioned... Nice catch, shit stick...

But let me extract the defition by which the article's title revolves around:

[quote} Capital is not a thing or a category; capital is a living, breathing phenomenon. Capital is an expression of the human relationships that generate economic value. Just as these relationships are dynamic, so is capital. The most important attribute of capital as it functions in the real world is that it is a relationship; as such it has the capacity to change form. This is often described as its liquidity function. Capital is also a human construct; it is not something found in nature or subject to scientific laws, despite the misguided attempts of today's rocket scientists to claim that it possesses such qualities. Most importantly, capital is unstable. If capital were better understood for what it is, it could be better managed and regulated. [/quote]

May 11, 2010

This is nothing new. Anyone who claims free market capitalism exists is plain wrong. Corporations, by their very nature, are antithesis to the free market (since they are created through the threat of force by the state, hence the existence of a corporate charter), assuming a free market is a place where individuals and firms VOLUNTARILY COOPERATE to exchange goods or services that they value. Since corporations are not formed through voluntary cooperation, but instead through the threat of force, they don't really fit into a free market system.

Even if you don't accept this argument, to argue that our current society is a free market is wrong. A fiat currency system, maintained by the Federal Reserve (which is, in part, owned by a cartel of banks), is not a component of a free market system. The only reason this paper, fiat currency works, is because the State allows you to pay your taxes with it. If not for taxation, their would be no incentive for us to compete for meaningless pieces of paper. And taxation, as well all know, is money the State is entitled to through the use of force (ie people who don't pay taxes go to jail). This is why Wilson created the personal income tax in the same year he created the Federal Reserve (ok so I just made this part up now so if someone is looking for a good idea for a thesis in history, this might be an interesting topic to explore)

Learn More

9 LBO Modeling Tests, 10+ hours of PE Cases and 2,447+ interview insights across 203 private equity funds. The WSO Private Equity Interview Prep Course has everything you'll ever need to break into the competitive PE industry. Learn more.

May 12, 2010
<span class=keyword_link><a href=//www.wallstreetoasis.com/finance-dictionary/what-is... rel=nofollow>LIBOR</a></span>:

Even if you don't accept this argument, to argue that our current society is a free market is wrong. A fiat currency system, maintained by the Federal Reserve (which is, in part, owned by a cartel of banks), is not a component of a free market system. The only reason this paper, fiat currency works, is because the State allows you to pay your taxes with it. If not for taxation, their would be no incentive for us to compete for meaningless pieces of paper. And taxation, as well all know, is money the State is entitled to through the use of force (ie people who don't pay taxes go to jail). This is why Wilson created the personal income tax in the same year he created the Federal Reserve (ok so I just made this part up now so if someone is looking for a good idea for a thesis in history, this might be an interesting topic to explore)

I commend you good sir, for you are one of the few people who actually have some economic sense. Just to add - apart from taxation the state also forces you to participate in a legal system that denominates contracts in the legal tender of the states choosing. However there are some historical examples that show that both of those were not enough to force a society into a chosen monetary system - so your taxation explanation is actually wrong.

And what do you mean by corporations being created throught the threat of force by the state? Do you mean any type of legal entity or just chartered corporations?

PS. MezzKet - an appeal to experience is a fallacious argument. The fact that I'm a nobody and the author invented junk bonds doesn't imply that I'm wrong and he's right (altough it does suggest it). I actually don't understand him, as his diagnosis of the situation seems to be spot on. But the proposed counter measures don't even come close to addressing the structural problems, they would just create different imbalances somewhere else.

May 11, 2010
Comment

man made the money, money never made the man