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.