Credit Crisis: The end of Capitalism?

Further to the previous post, this will be on a more serious note.

Greed. 
If there was one word to sum the whole credit crunch up, that would be it.

I am not about to espouse overly academic notions on the abovementioned topic, but rather more "layman" views. (As layman as my brain allows anyway...) Before we start, let's take a step back in time to when Karl Marx, Father of Communism, was still alive.

Karl Marx, Das Kapital, wrote in 1867:

"Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism..."

Isn't this interesting? That Capitalism, fuelled by greed, can actually stimulate a turning tide against itself and resurrect the old ghost of Communism which all but died about half a century back. BBC reported some time back that Karl Marx was gaining popularity in this present crisis.

What USA is doing now, whilst bailing out the big "un-faileable" companies, is extremely short-sighted. Most recessions undergo a normal period of decreasing demand of goods and services, followed by a gradual stabilization that brings about a bottoming out of the financial markets, and recovery follows soon after (see told you this is a layman article). Not this time.

Because of the interference in the markets, the US of A effectively ensures that it will have a long lingering problem of bad loans and lousy leaders that will be sitting around long after the actual crisis is over. Recovery will take an extremely long time, because companies which are not healthy are going to be surviving, barely, for an extended period of time.

And in a capitalistic world, we would all do well to know that it is always the survival of the fittest that brings about evolution of the species. If these dying humungous companies with bad management are allowed to linger past their prime, does not that cause an inbreeding of bad ideas (e.g. poor risk management, concept that government will always bail you out if you are big enough etc)?

Being a layman, I see things very simply. If you are sick and you need to puke, put your fingers into your mouth to induce vomiting. If you are afraid of spilling your guts out, you will only feel sick for a longer period of time. The same analogy can be applied to the state of the economy now. The government needs to decide to allow other institutions or corporations to buy the failures out instead of stepping in to interfere. Also, for the bailed out companies, the leaders NEED to go. It is extremely surprising and disturbing that 9 of 10 top honchos in the troubled companies that have been around since 2006 are STILL in their hot seats!

Short-term wise, there will be pain in doing so, and in this present climate, the pain will be intense and akin to extracting a bullet from your tummy. However, if you don’t do so, the “bullet” will cause the wound to fester, and you eventually die. Which do you choose?

Actually, both Communism and Capitalism concepts have their merits when executed in the way it was intended to. Unfortunately when you add in the human factor, things don’t always turn out the way they are intended to. For Communism, it conveniently ignores that laziness is a natural human trait, and for Capitalism, greed.

But well, that’s life. Nothing is perfect.
Neither is this article. I have left many gaping holes for you to poke at so that I can have a discussion with great minds.

A real letter from a boss to his employees

To All My Valued Employees,
 
There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job.
 
What does threaten your job however, is the changing political landscape in this country. Of course, as your employer, I am forbidden to tell you whom to vote for -- it is against the law to discriminate based on political affiliation, Race, creed, religion, etc.
 
Please vote who you think will serve your Interests the best. However, let me tell you some little tidbits of fact which might help you decide what is in your best interest. First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a back story.
 
This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You've seen my big home at last years Christmas party. I'm sure all these flashy icons of luxury conjure up some idealized thoughts about my life. However, what you don't see is the back story.
 
I started this company 12 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living space was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.
 
My diet consisted of Ramen Pride noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn't have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business -- hard work, discipline, and sacrifice.
 
Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom's for the latest hot fashion item, I was trolling through the Goodwill store extracting any clothing item that didn't look like it was birthed in the 70's.
 
My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.
 
So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don't. There is no "off" button For me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, ****, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to me like a 1 day old baby.
 
You, of course, only see the fruits of that garden -- the nice house, the Mercedes, the vacations... You never realize the back story and the sacrifices I've made. Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't.
 
The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for. Yes, business ownership has is benefits but the price I've paid is steep and not without wounds. Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:
 
I am being taxed to death and the government thinks I don't pay enough. I have state taxes. Federal taxes. Property taxes. Sales and use taxes. Payroll taxes. Workers compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my "stimulus" check was? Zero. Nada. Zilch.
 
The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check?
 
Obviously, government feels the latter is the economic stimulus of this country. The fact is, if I deducted (Read: Stole) 50% of your paycheck you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy. Here is what many of you don't understand; to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.
 
When you have a comatose man on the verge of death, you don't defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the mud of America are the essential drivers of the American economic engine.
 
Nothing could be further from the truth and this is the type of change you can keep. So where am I going with all this? It's quite simple. If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child's future. Frankly, it isn't my problem any more. Then, I will close this company down, move to another country, and retire.
 
You see, I'm done. I'm done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.
 
While tax cuts to 95% of America sounds great on paper, don't forget the backstory: If there is no job, there is no income to tax. A tax cut on zero dollars is zero. So, when you make decision to vote, ask yourself, who understands the economics of business ownership and who doesn't? Whose policies will endanger your job? Answer those questions and you should know who might be the one capable of saving your job. While the media wants to tell you "It's the economy Stupid" I'm telling you it isn't.
 
If you lose your job, it won't be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the Constitution, and will have changed its landscape forever. If that happens, you can find me in South Caribbean sitting on a beach, retired, and with no employees to worry about.
 
Signed, 

Your boss