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‘Capitalism might not be dead but it is totally rigged’

Some Marxists think that capitalism died 10 years ago this month when a couple of obscure hedge funds blew up, generating few headlines outside the financial press. What happened next did attract more publicity: the Great Financial Crisis (GFC).

Some believe it was all about US sub-prime mortgages; Bertie Ahern probably still thinks it was all down to Lehman Brothers. Most sensible analysts think it was all a bit more complicated than that.

The problem was – and still is – leverage. Polonius was one of many characters – real and fictional – throughout history to warn about about borrowing and lending. The real lesson is bit more subtle: don’t borrow (or lend) too much.

Polonius, in Hamlet, was advising his son never to lend anything at all to a friend since both your cash and your friendship are at risk.

The lessons of the GFC are that some borrowing is good but too much is bad: not only are the borrowed funds at risk, but, once they hit a certain size, whole economies are imperilled.

It would have been better if bankers had in fact lent to their friends since that might have provided knowledge, a few clues, as to whether or not the borrower was ever likely to be able to pay back the money.

It’s not that capitalism is dead; rather that it is totally rigged. The GFC revealed this simple…

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