|The 2008 Financial Crisis |
|A Review and Critique |
|Nicholas Makris ...view middle of the document...
The rush of finances pertaining to investment reserves, endowment collaterals, pensions and the stock markets, etc. played a great role in transforming household’s savings into high risk capital assets (Bezemer, 2011). Similar to most sudden financial increases, the swift fund additions acted as bait to hook even more investors, leading to further increases until the system collapsed. Ironically, the crash seemed to have been brought about by the destitute (Ohanian, 2010). Hunting for an infinitely increasing rate of returns, one saw the rise of deranged investment plans and rising prices. This system came crashing down on itself as massive debt structures were supported by rickety and financially weak households (Mellor, 2009).
Leftist critics have analyzed and critiqued intensively, the worldwide financial capitalism and concurrently there have protests to stop globalization. However, no concrete solution has been offered, most definitely not one that has garnered much support (Stiglitz, 2009; Bholat, 2009). This is possibly due to the constraining nature of “there is no alternative” style of politics and neoliberal advances on state affairs, which is matched by anti-state Libertarians (Mellor, 2009; Desmed et al. 2010). But now that the state possesses complete and utter control of advances, the names of Keynes and Marx are being re-imagined and reinstated in the current scheme of things (Stiglitz, 2009; Acemoglu, 2009).
The recent economic crisis has given birth to a number of questions, such whether the crisis can be considered as a failure of American free market capitalism, where socialism is a possible alternative by virtue of the current economic presentation?
The present study aims at finding out whether capitalism is sustainable in United States (U.S.) after the recent 2008 financial crisis. The research questions are as follows:
• Will the global economic crisis change the principles and ideas of capitalism that have been enshrined for many years?
• Is the United States heading for abandoning the basic tenets of capitalist orthodoxy that has brought prosperity to the U.S. over the past several decades?
• Will the economic crisis lead to the decline and fall of American-style free market capitalism?
An Overview of the Crisis
In retrospect, the United States has experienced its worst economic downturn since the Great Depression. The crisis began in the year 2006 with the housing market, particularly the markets of subprime mortgages, prime mortgages, real estate, and finally made its way into the commercial market, corporate bonds, and various other debt types (Bezemer, 2011; Battiston, 2007). Owing to that, the banks in the U.S garnered losses of more than one trillion which lead to a steep decline in lending and consequently the “Great Recession” (Shaikh, 2011; Kotz, 2009).
It had been increasingly apparent for some time that America’s expansion was not going to...