Capitalism rules!

While the old saying, “when the US catches a cold, the rest of the world gets the flu,” can certainly serve to make us Americans feel a little guilty about our role in a global depression, at least we can take solace in knowing that it is our system of capitalism that actually should lead to us recovering faster than the rest of the world.

The reasons are simple.  Our employer friendly environment in the US—the very system that has allowed companies to quickly downsize—is precisely what is going to lead to our faster recovery.  Consider what would happen if, as in the cases of China and Germany, the government slowed the pace of layoffs.  That would force companies to continue to pay unneeded employees instead of investing in their recovery efforts.  In China, the government has ordered state owned businesses not to lay-off people and in Germany, the government has reached an agreement with the largest companies to refrain from layoffs for six months.  That all but assures that the time it will take for those companies—and those economies—to hit bottom will be extended, thereby extending the time it takes for recovery.  In the US, companies are finally starting to react and in a big way.  Were we to mitigate that reaction, we would simply lengthen the bottom of the bathtub curve that is going to define our depression.  Fortunately, as I’ve noted over the past few days, the government stimulus plan is going to take a lot of time, so we don’t have to worry too much about that elongating the tub, either.

It’s ironic that while capitalism is clearly the cause of our problems, it will be capitalism that saves us, too.

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Capitalism Rules...
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