Predictions of the Death of Capitalism are Greatly Exaggerated.
by John A. Epeneter
Introduction
It seems timely to consider the topic of the survival of capitalism as we of the 21st century have known it because there seems to be at this time, January 30, 2010, a surplus of pessimism. The goal of this brief paper is to explore whether this pessimism is justified.
First, though, let’s start with a definition of capitalism as contained in the web encyclopedia Wikipedia:
“Capitalism is an economic and social system in which capital, the non-labor factors of production (also known as the means of production), is privately owned; labor, goods and capital are traded in markets; and profits distributed to owners or invested in technologies and industries.
There is no consensus on the definition of capitalism, nor how it should be used as an analytical category. There are a variety of historical cases over which it is applied, varying in time, geography, politics and culture. Economists, political economists and historians have taken different perspectives on the analysis of capitalism. Scholars in the social sciences, including historians, economic sociologists, economists, anthropologists and philosophers have debated over how to define capitalism, however there is little controversy that private ownership of the means of production, creation of goods or services for profit in a market, and prices and wages are elements of capitalism.”
There seems to be some general agreement (although no facts or statistics are presented here to back that up) that a degree of freedom from government interference in markets, property rights, pricing, and contracts is essential or least helpful in aiding the growth that capitalism is demonstrated to produce. Exactly how much freedom may be granted or taken away by government while still preserving capitalism is a hot topic these days.
There also seems to be general agreement that capital is needed to support new business startups and business expansion through innovation, productivity, technology, and risk taking. One risk to the capitalist system is wide-spread destruction of capital during recessions and the accompanying bear markets, or through failure to operate a profitable businesses on a country-wide scale. The Great Depression which started in 1929 is an example. Even when the United States came out of those hard times in the war-time 40s, government debt, not private capital, was responsible, in large part, for the turnaround.
Another risk to the capitalist system is the Federal Reserve’s over-reaction to domestic and/or global crises by excessive monetary stimulus, creating an environment for excessive debt, which in turn creates bubbles in asset values and debt. We will explore this topic so more.
Another risk to the capitalist system is the power to tax away profits and incentives to employ capital. As government takes on more and more debt, it will or should seek increases in taxes to pay some of the debt. If the capability of the capitalistic system to pay these taxes is stressed beyond its ability to pay, the engines of growth….innovation, risk-taking, and profits…will dry up. The painful solution could be severe devaluation of the currency and/or default on the debt. It’s happened before and it will happen again.
Low Interest Rates
To combat the Great Recession of 2007-2009, the Federal Reserve under Chairman Benjamin Bernancke has lowered interest rates to zero. Former Chairman Alan Greenspan also lowered interest rates to below 2% during the 2002 to 2004 period because he hiked them to far…from 4.75% to 6.5%..... in the 1999 to 2000 time period. This was at least partially responsible for the 2000-2002 recession. More importantly, it set up more volatility in asset prices and credit expansion. Now, the grand question is can the Fed raise interest rates to forestall another asset and credit bubble whether choking off a recovery.
Low interest rates create bubbles because the general population are tempted and some people do make unwise purchase decisions…bigger houses, mistaken or foolish business expansion, more expensive vehicles, etc. Then when certain of the debts are partially or fully paid through foreclosures, the original equity capital is lost to the purchaser. However, the money supply is not decreased because the seller of the asset received cash which went into the economy or savings. The problem here is the seller’s cash may not have found its way into a tangible asset that created jobs and profits. This assumption is open to dispute, since this writer is not an economist by trade.
There are various theories as to what a realistic or nominal rate of interest should be. Brian S. Wesbury writing in his book It’s Not as Bad as You Think: Why Capitalism Trumps Fear and the Economy Will Thrive says the nominal rate of interest should be equal to the average gross domestic product for eight quarters. When the nominal interest rate is higher or lower than the actual rates, bad things happen. He cites Ludwig von Mises dictum that low interest rates encourage bad investments, oversupply of housing, and eventual collapse in home prices. We just saw that happen in 2007 to 2009. In addition to housing bubbles, low interest rates caused the liquidation of many savings and loan institutions because they loaned out at low mortgage rates based on low-interest rate deposits just prior to the time when Paul Volcker, federal Reserve Chairman in the 70s jacked up short-term rates. The S&Ls could not stay in business while paying depositors rates higher than the rates of interest they received on mortgage loans.
Housing activity is deeply depressed because the supply of homes still exceeds the demand for them. Potential buyers are facing a number of obsticles. Higher downpayments, reduced income, unemployment, credit card debt, higher FICO score thresholds, etc. are just a few. Housing recovery is predicted to be slow because economic activity is predicted to be slow. Therefore, it is reasonable to believe the Fed will keep interest rates low, even below nominal rates, for an unusually long period.
We have just seen one of the more astute Federal Reserve Chairmen Ben Bernancke confirmed to another term. While we are not confident that further volatility in interest rates can be avoided, we do have confidence in the immediate future. Generally, low interest rates for an extended period can result in another housing bubble, this time looks different. On this topic of low interest rates, the death of capitalism is greatly exaggerated for the moment.
Corporate Profits
Corporate profits are the food chain of retained capital, after dividends have been paid to shareholders. As these retained profits are invested, the economy grows and capitalism thrives. Higher taxes, operating costs, government regulations, and the like act as a restraint on profits, a growing economy, and by deduction, a thriving capitalist society.
In today’s environment (remember its January 2010), better-than-expected profits have been driven mainly by reduced costs (read “mostly job cuts”), since stagnate consumer and business demand has resulted in stagnate revenues (up until the 4th quarter of 2009). Unless the top line grows, the profit growth will stagnate, and so will the economy. It appears that just about all cost savings have been extracted at this point. While this analysis may be over-simplified, it is essentially true for the moment.
This past week, the Wall Street Journal reported some good news. Procter & Gamble and Colgate-Palmolive reported that towards the end of 2009, shoppers are increasing their purchases of brand names. Microsoft reported that consumer demand for Windows 7 resulted in a 60% increase in profits and a 70% jump in revenues during the holiday quarter ended December 2009. Also, in the 4th quarter of 2009, consumer durable sales increased by 2.9%. Perhaps we should read into that too much, as television sales are included in the durable category.
Income taxes are slated to rise. While President Obama as recently as last Friday proposed tax credits and deductions for hiring and purchases of business equipment, he has also proposed new taxes on banks and securities trading. The rising government debt load can lead in two directions, either together or to the exclusion of one of them: rising taxes and/or ultimate debt default. The capacity of corporations and the rich to forever bail out the government from its debt load is limited. Debt default would possibly result in the end of capitalism in this country as chaos and riots result in a forced change to a more centrally-controlled government take-over of a less-free country.
Another source of threats to profits is the cap-and-trade legislation. Aside from the fact that there is no agreement as to whether there is a global warming and aside from the fact that the legislation is dead in the Senate, a limit on carbon emissions imposed by administration fiat on carbon emissions is either an immediate reduction of profits (and capital) or a pass-through cost to consumers, resulting in future inflation, which in itself is probably a future reduction of profits. Witness the SEC, of all government bodies, requiring public companies to disclose climate change information in financials, if material.
Gross domestic profit grew 5.7% in the 4th quarter of 2009, as was reported on Thursday, January 28. A little over half of that was attributed to inventory building, which some economists believe will not continue in 2010. Further government stimulus may be needed to keep the GDP growth strong. That would further add to the government debt load. Better to spur exports of products and services that have little or no immediate foreign competition, such as food, water, software, etc. Yet, the threat of inadequate response to our competitive disadvantages remains.
As to the topic of corporate profits, there are certainly threats to future profit increases, but the death of capitalism is greatly exaggerated for the moment.
Big Government
Brian S. Wesbury in his book It’s Not as Bad as You Think: Why Capitalism Trumps Fear and the Economy Will Thrive makes several key points. First, records show that as government spending rises, unemployment rises. Is rising government spending the cause of higher unemployment or is it just a game of “figures don’t lie, but liers figure.” The reason given is that the size of the private sector becomes less vibrant and less productive. But that isn’t the whole answer. When the productivity (read GDP) of the private sector declines, government spending on unemployment and other expenses to prop up the economy increases. Thus, there is some correlation. Maybe it should be stated the other way around: as unemployment rises, government spending rises.
Nevertheless, if government activity increases and private sector activity decreases, we have the start of a possible slow demise of capitalism, don’t we? After all, if government made up 100% of the economic activity, there wouldn’t be any economy, would there?
The mantra of the present government led by the Democrats, placed in power in the belief that the populace wanted change, have expressed in many ways and demonstrated a mistrust of private enterprise. Brian Wesbury writes that this leads to a semingly logical question: since private enterprise is made up of people, and, as a general body of the population, it is assumed that they are to be mistrusted as greedy, money-seeking, and stupid, who is to say that people will be any more ethical and productive in a government job? Human nature is human nature and it doesn’t change much in a vacuum. Ergo, why should we trust an enlarged government to give us cost-effectiveness and efficiency?
A government takeover of the healthcare industry in this country has already been estimated to increase costs by the Congressional Budget Office and the Wellpoint Health Insurance company, after exhaustive study. Critics point to the Medicare program, saying that it is inefficient, fraud-ridden, a loss-leader, a burden upon taxpayers, and leaves doctors and hospitals underpaid for services, in terms of market prices for those services. The Massachusetts universal plan, covering 98% of the insurable residents, is also running in the red. The plan covers 165,000 residents at a cost of $800 million, with costs up 42% since 2006. The state is now trying to figure out how to cut costs.
Some big government divisions may not be greedy or money-seeking, but some of the personnel in those divisions could be classified as incompetent. Take the Securities and Exchange Commission for example. It has a 2010 budget of just over $1 billion, covering 3,692 full-time equivalent employees. Yet it was unable to figure out that Bernard Madoff was running the largest Ponzi scheme in history. The chairman Christopher Cox had no clue that the largest Ponzi scheme in history was going on beneath his nose. According to Charlie Gasparino, he didn’t have a clue about anything else, either. One whistleblower Harry Markopolos did figure it out and wrote numerous letters and notes to the SEC, spelling out that a Ponzi scheme was being run. When the SEC auditors showed up at Madoff’s offices, they did not perform a detailed audit which they should have. Incompetent, inefficient, bribed…..take your pick. Markopolos testified before Congress that the SEC was incompetent.
Our conclusion as to this topic of big government is that big government with either incompetent or anti-capitalistic personnel can present a real risk to a thriving capitalist system. Just look at Venezuala where an incompetent dictator has severely restricted and reduced privately-owned capital.
Risky Bond Holdings
One threat to capitalist system is the potential for large-scale losses on bond investments. We have already seen trillions of dollars lost in the 2007-2009 mortgage-securtized bond market. The process was chronicled in Charles Gasparino’s best-seller The Sellout. Briefly, Wall Street started trading in risky bonds to jump-start its profits. Greed, managerial neglect, and competitive spirits were operating at peak capacity. The problem turned out to be the underlying mortgages on over-leveraged Mcmansions, handed out to blue-collar homeowners who could not afford them. When mark-to-mark accounting rules were kept in place until March 2009, when Bear Stearns, Lehman Brothers, and AIG imploded, the inevitable writedowns throughout the world helped to launch the erosion of private investment values and trust in financial institutions.
The good news for survival of the capitalist system is that the US government is taking steps to prevent such an occurrence from happening again. The outlook for the short-term is positive. The outlook for the long-term is not so positive because throughout history, financial crises have occurred in one form or another with consistent frequency, duration, and ferocity. This history is chronicled in Carmen M. Reinhart & Kenneth S. Rogoff’s book This Time is Different: Eight Centuries of Financial Folly. Short memories and the variety of ways a financial crisis can be engineered almost guarantee a repeat performance the 2007-2009 crisis, with a different cast of characters, stage, and scenery.
More recently, certain countries have issued debt instruments at an unusually high rate, to cover deficits brought on by the worldwide Great Recession. If one or more countries default, that could snowball in the worldwide bond markets, possibly causing panic selling and loss of capital. Greece and Spain are two countries that could start a selloff if their economies and budget deficits deteriorate further. The situation must be watched closely. We think one way to look at this situation is to view it as a deceptive bubble. The bond assets will become inflated, even as they trade at modest yields, as the country’s ability to pay back the debt decreases significantly. There are two ways for that to happen: 1) the country could default, or 2) the rating agencies could progressively downgrade the debt to junk. Jim Chanos, the hedge fund manager who first discovered Enron was a basket-case and made billions shorting the stock, thinks Greece could start the bubble-bursting crisis. Kayle Bass, the hedge fund manager who made a half-billion dollars buying insurance on mortgage-backed securities in 2007, is shorting Japanese bonds these days. These guys must be taken seriously because they do their homework well.
The US government has just announced its 2011 budget. It can be found at www.whitehouse.gov/omb/ or www.budget.gov . The Summary Tables are instructive. It shows deficits through 2020, even though the deficits as a percentage of gross domestic product are coming down into the 3.9% to 5.0% range. The key number we look at is the percentage of debt held by the public to gross domestic product. That number is going up, from 63.6% in 2010 to 77.2% in 2020. It could get worse if the government’s extraordinarily high forecast for GDP of 5.1% in 2011, 6.0% in 2012-2013, and an average of 4.86% for next 7 years through 2020 doesn’t happen. Incredibly, the assumptions contain no reduction in GDP for a single recession. To say these assumptions are optimistic would be an understatement.
In connection with the announcement of the budget and the size of the required debt offerings through 2020, Moody’s rating agency made an announcement that in effect said that it was continuing the top rating of Aaa for US government bonds, that the debt was not on a watch list, and that there was a stable outlook on the US. However, what Moody’s exact wording was hasn’t got much press. What the announcement actually said was this: “Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the Aaa government bond rating.”
Kenneth Rogoff, author of This Time is Different, has studied debt levels of other countries and has concluded that the US is moving towards the day when interest rates will soar, interest expense will significantly exacerbate the deficit problem, the dollar will plunge towards a valueless currency, and the economy would face a crisis. Rogoff thinks when public debt reaches 80% of GDP, all bets are off as to when bad things start to happen.
Gerald Seib, writing in the Wall Street Journal on Tuesday, February 2, 2010, believes the US is at a point of losing its traditional global role, whatever that exactly is these days. He cites several potential effects (of excess US debt): 1) Chinese leverage over US policies, 2) a potential depreciation of the US dollar, 3) not enough money to defend ourselves against enemies, and 4) an America no longer invincible, resulting in other countries paying less attention to what the US wants. One danger is the loss of competitiveness in our export markets. That would pose a threat to profits from our capitalistic system.
We should be clear as to who in the government is primarily responsible for deficits. We think the primary responsibility lies with Congress. Here’s what spendthrift Congresspersons do. They add earmarks to legislation so the folks back home will see how much money their Congressman or women are bringing to them and vote to put them back in office again to keep the deficit up. Senators recently voted against saving $20 billion by consolidating 640 government programs that are duplicated. Senators also vetoed an amendment to eliminate $245 in unspent 2009 appropriations for consultants, receptions (read parties), and laptops. The Senate also vetoed Kent Conrad’s bipartisan deficit commission. Good thing on that one because it could have resulted in an increase in taxes, instead of focusing entirely on cutting spending. After all, saving us from the “national debt crisis” must come from tax hikes, right? Some Congresspersons intend to oppose the spending freeze proposed by President Obama, and why not….they need the votes to keep them in office. Such a system will spell disaster someday. It’s a wonder it hasn’t done so yet. The Eurozone is considered a crisis when the debt to GDP is only 13%. Why the world hasn’t focused on the US is a mystery.
Argentina is an example of a democracy that suffered during the 20th century from various economic crises. A severe depression, accompanied by growing public and private debt, culminated in a run on the banks in 2001 and a flight of capital to other countries. The Interim President Adolfo Rodriguez declared a default on the government’s debt in December 2001 and resigned. His successor announced an end to the 1-to-1 peg to the US dollar in early 2002 (probably was forced to). Nominal GDP went down 18%. However, over the next five years, GDP grew an average of 9% a year. (the US should be so lucky). In this case, capitalism did not roll over and die. It flourished.
If the country to be concerned about (regarding potential debt default) is the United States, then the capitalistic system here in the states could suffer a significant blow, as demand for still bigger government tries to solve the problem it created for itself. However, if the US can somehow emulate the turnaround that Argentina accomplished, capitalism will also do well.
Our conclusion on this topic is as of now, loss of the significant elements of capitalism due to risky bonds….private capital, trading, profits, and technological advances…. in the US is no immediate danger, but it is starting to get dicey.
Beware of Greeks Bearing Bonds
Actually, it’s not just the Greeks who have subprime debt obligations. The list includes Portugal, Ireland and Spain who are also having trouble financing their budget deficits, deficits that have grown to 10% of gross domestic product with Greece the highest at 13%. Ten percent!! Thirteen percent!! The world thinks that’s high. Everyone seems to ignore the fact that the US will be at 63% by the end of June 2010! The European Central Bank’s President Jean-Claude Trichet tried to cover up the crisis by saying the average debt to GDP ratio for all euro zone countries is a mere 6% and well below the double-digit percentages for the US and Japan. We in the US don’t quite understand the crisis, but in fact it is a crisis because in the euro zone, the law supposedly forbids defaults.
The problem harks back to the formation of the European Union. The leaders of the 16 countries thought that strict controls on deficits, low interest rates, and the strength of a union of strong and weak nations would prove beneficial. However, the European Central Bank had no direct power of fiscal policies of member states. What actually happened was the weak nations borrowed too much in an attempt to spur their economies. The high debt loads with the interest expense prevented the desired economic expansion. One wonders if this scenario could be repeated in the US.
The stock market has taken the crisis seriously and has been selling off partly because of the world debt load as well as the lack of economic recovery evidence. Actually, the strong Euro countries might possibly bail out some of the weak PIGS (Portugal, Ireland, Greece and Spain), but Spain is such a huge country, twice the size of the other three combined. The market participants seem to be saying no bailout, for the overall currency market was selling the euro. The euro has fallen from the $1.50 range to $0.73 as of Friday, February 5, 2010. Insurance, in the form of credit default swaps, has become costly, with premiums soaring, indicating worries that a default or two is in the making. Can you believe that euro money was moving into US and Japanese currency. If that is true, the US dollar’s advance is not sustainable because it is not being driven by the fundamental of economic growth.
Short-seller Raids
The short-sellers were all over Bear Stearns, Lehman Brothers, and AIG, to mention a few. David Einhorn was declared Public Enemy Number One by the CEO of Lehman Brothers Richard Fuld. Defending his short position, Einhorn clung to his belief that Lehman had not disclosed its high leverage (30 to 1), nor had it disclosed the $30 billion or so of toxic securitized mortgage investments which had not been written down as required by FASB 157, nor had it written down the value of its Archstone-Smith investment. The story ended badly for Fuld and Lehman…Chapter 11 bankruptcy.
The truth of the matter is that short-sellers can do a lot of damage, but so can CEOs and their managerial staff. Lack of truth-telling and disclosure was one cause of Lehman’s destruction, but the real destroyer was the toxic subprime mortgage bonds. Take it one step further, and it was the people who approved and closed the mortgage loans. CEOs and the senior managerial staff either did not understand the toxicity of the subprime mortgage assets or they deliberately plunged ahead adding more of the stuff to their balance sheets, thinking the day of reckoning would never come. Fuld was not exception, and his stubbornness and pride contributed to the downfall of Lehman.
As of this date, January 31, 2010, the SEC is still soliciting comments to their proposed up-tick rule for short-sellers. If approved in its current form, the proposal would not ban short-selling. Consequently, the risk will still exist for short-seller takedowns. Clearly, billions of capital were squandered as CEOs and CFOs struggled to understand their balance sheets. Billions of dollars could be lost again if short-sellers gang up on banks and other financial institutions loaded with risky debt on their balance sheets from emerging markets and countries such as Greece, Spain, Venezuala, etc. There is nothing to prevent future takedowns.
Our conclusion as to this topic is that there is no protection against short-seller raids, and even if the SEC uptick rule is approved in its final form, short-sellers will be able to take down another target company when the time is right.
Inflation Crises and Hyperinflation
Kenneth S. Rogoff and Carmen M. Reinhart’s book This Time is Different: Eight Centuries of Financial Folly makes this point on inflation: defaults and inflation are integrally related. A government that defaults on its debts is not going to preserve the value of its currency. Rogoff and Reinhart looked at more countries than any other publication to date. What they found was that inflation and a declining currency value frequently is a result of a government’s misuse of its “monopoly” of its currency. Once its currency is no longer useful, transactions are done with a foreign currency. The break from that use of foreign currency and a restoration of use of a government’s domestic currency takes a long time. Hard currency is resorted to by indivduals and sometimes the government, seeking to help restore the currency payment system.
Why should we in America care about all this? After all, don’t we have the finest financially engineered and central bank control of our monetary and financial system? Unfortunately, the 2007 to 2008 period proved otherwise. But, getting back to the devaluation of currency issue, America should care because inflation follows currency devaluation just as night follows day. Further, debt defaults are the next shoe to drop. Following debt defaults, the money flow to further fund debt needs stops. Putting it in more sophisticated language, governments that mishandle their debt loads will soon be shut out of international capital markets. Why would you lend to a neighbor again after he refused to pay the first loan?
Here is the scary conclusion that Rogoff and Reinhart come to and I quote: “But highly leveraged economies, particularly those in which continual rollover of short-term debt is sustained only by confidence in relatively illiquid underlying assets, seldom survive forever.” (Italics mine) If we may be so bold as to interpret what the good professors have concluded, if the United States continues on its present course of running hugh deficits and issuing debt obligations to fund them, it will not survive forever as a country!! Rogoff and Reinhart are to be taken seriously because they have compiled many data points in their book
Our conclusion on this topic is that the capitalist system that appears so strong in this country can come to a temporary halt if we as a nation do not gain control of our budget, and that possibility is pretty scary. The one factor that should give us confidence is that trade will go on between people, businesses, and nations, regardless of the form of government. Witness China and Russia where centrally controlled governments are prospering because of strong export products and services.
We started this paper in complete confidence that we would be able to present information that would show that the predictions of the death of capitalism are greatly exaggerated. After considering the amount of debt that the United States is building as a percentage of GDP and the lack of effective controls in reducing the deficits that occur year-after-year, we are no longer quite as confident. No other factor is poses such a threat to our system in the next 10-20 years as this one. We did not attempt to discuss our country’s tax capacity ( to tax our way out of excessive debt) to determine whether our country is beyond repair at this moment. We’re afraid the answer will be the tax capacity will not be enough to pull the US out of its debt buildup. Our conclusion is that capitalism will not die, despite a possible US debt default and loss of currency value. Clearly it will suffer, but as long as the US has products and services to compete with and sell to the rest of the world, capitalism will survive.
Presidential Retribution
If a US President chooses to pick a fight with businesses, he should be prepared for the result that the history of the Roosevelt era teaches us….a decrease in business activity and economic recovery. In 1935 when the public spending programs did not lift the country out of the Great Depression, President Roosevelt decided to pick a fight with Wall Streeters and businessmen. First, he led Congress into passing a graduated income tax on businesses, which acted as a penalty on large firms. The top rate was 27% (don’t we wish a return to that rate today). Next, he led Congress to pass the Wagner Act which favored unions in every conceivable way. The closed shop and the sit-down strike led to loss of thousands of hours of productive work, eventually decreasing earnings and the ability to hire new employees. Next, he strengthened antitrust laws. Particularly hard hit were the utility companies, which found it practically impossible to raise capital. Not surprisingly, the result was the Depression of 1937 and 1938, which finally came to an end when America declared war on Japan in 1941 and entered the war in Europe against Germany openly. However, some students of history have argued that businesses did better because Roosevelt needed them to manufacture the war machine that ultimately won the war. So he stopped fighting them, both in the press and with punishing legislation.
No period of history is exactly comparable to another. Nevertheless, we tend to look at history if only to learn not to make the same mistakes. If the actions of our current President by comparison seem to have parallels to the actions of President Roosevelt, you wouldn’t be too far wrong. President Obama has said in his State of the Union address recently that “I will not let companies that enjoyed soaring profits and obscene bonuses block my financial reforms. If these folks want a fight, it’s a fight I’m ready to have.” In the 2011 budget proposal, there is a new tax on banks called a “responsibility fee”, there are new taxes on oil and gas, there are new taxes on LIFO accounting for inventories, and there are new taxes on international business activity. The President’s push for costly healthcare reform has frozen activity of small businesses, waiting for clarification. Small businesses are where most of the new jobs are created. In wake of the credit crisis, the President has proposed new regulations on financial institutions which could result in administrative decisions to break up a large financial institution.
We present this possibility of a parallel to the Roosevelt era, not because we particularly want to criticize President Obama’s policies. Rather, we make this brief comparision to call attention to the possibility that history might be repeating itself. We hope a depression does not occur. However, when an environment exists, encouraged however inadvertently by the President of the United States, in which businessmen are feeling a sense of discouragement from investing, innovating, hiring, and expanding, business activity stagnates. This economy cannot afford stagnation, and we hope much good comes from the current reform effort. Perhaps history will not repeat itself and that this time will be different.
As to this topic, our conclusion is that if history repeats itself, capitalism, prosperity, and the economy will not be as robust as it could be in the years to come.
In conclusion, we believe the most dangerous threat to our way of life is the debt load of this country and the growing danger of a devalued currency and inflation.
|
Subscribe to our Newsletter
