Good for them. Markets are working. If the emotional and social value of forgiving debt is worth more than the expected value of collecting on that debt, then capitalism is working! Who could be opposed to this?
The markets probably underprice the value of forgiving debt. For instance, cancelling all mortgage debt under $300K would liquefy the housing market overnight and bring housing prices more in line w/ income, while improving public health and welfare.
The market doesn't price such things in, though. That would be up to the government. How much was spent on the bailouts, and how much would that translate to per mortgage?
The reason the market doesn't price such things in is that the guy holding a $300k mortgage is unlikely to personally realize $300k in improved public health by forgiving the debt.
A systemic (political, not free-market) policy of inflation encourages people into debt by decreasing the cost of borrowing (minus the increase in risk-cost, which most people are bad at judging), and by squeezing people by decreasing their cost-of-life margin versus their earning power.
Not to mention politically motives to encourage debt, by incentivising things like mortgages, or creating educational debt systems, etc.
The very dollar itself is an instrument of debt, and it is self-perpetuating -- there has to be a way to pay off the interest on that debt that was the genesis block for that dollar, of course that's done by "printing" money (adding a zero on a digital ledger), which creates inflation, which encourages people into debt, which requires more money to be printed, which requires interest to be paid off on that dollar, which...
Capitalism is a meaningless word. Does it mean currency based markets? Markets in general? The wage/labour model of business? Corporate Law?
Ultimately we as humans coin many words for real experiences. In my experiences, I exchange my services, in exchange for a representation of value, and in turn purchase my necessities with this representation of value (and in this modern era purchase wants as well).
Personally if you want to stick with idealism, I would coin Capitalism as "... an economic system based on private ownership of the means of production and capital goods, and the production of goods and services for profit in a market economy."
We don't have that 100%. That's for sure. The government has a large part of of modern means of production. And the true public also has co-operatives, syndicates, mafias, gangs, and non-profits.
We definitely have a market economy though. So I definitely agree with your point. I just think Capitalism is nothing more than an ideal.
Because I enjoy this topic so much, my system classifications are as follows: The West: "Inverted Totalitarianism", EU: "Pre Natal Neo-Feudalism", China: "Party Monarchism". As far as I'm concerned, ideologies are great for discussions, but horrible at describing real things.
capitalism is the idea that the accrual of property (or assets, or 'capital') is a virtue unto itself[0]. Possibly in opposition to others in the 'free market' umbrella who may see the acquisition of assets as a sign that you are providing a social good efficiently (but not necessarily a virtue in and of itself).
[0]there are different styles of this, on the conservative end there are those who tend to value the individual accrual of assets; on the liberal end you might find nationalistic types who measure the greatness of society by how much in assets it accrues or trades (indirectly, by measuring GDP).
well, keep in mind that debt forgiveness is deflationary, so if you are obsessively worried about a great depression caused by a deflationary spiral, these people are causing some serious trouble.
