INTRODUCTION
The capitalist and the not capitalism or communism are the 2 types of economic system. The capitalist is a free market that gives a freedom to people to be wealthier without any help, however, the noncapitalist is a government rule the people and people don’t have freedom. To be successful in life people should take a risk by betting or investing mortgages, investments, funds, or other products. The non-fiction book name The Big Short: Inside the Doomsday Machine is written by Michael Lewis is about the subprime of mortgage and bond, and the work o f people like, Bear Stearns, Deutsche bank and Steve Eisman of front point partner believes that the housing bubble will be break apart and the wall will be in debt. However, the
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If individuals or countries are left unrestricted to pursue their own self-interest that will have an incentive to specialize to comparative advantage thus making themselves and other better off. More commonly it referred as the advantage of a policy of Laisse Faire, benefits of a free market, allowing the unrestricted exchange, and it is a capitalist market-based solution. The government leaves people free to choose and it is the best for economic policy of wealth creation because are unrestricted so that they can create more money and become rich. It describes to The Big Short: Inside the Doomsday Machine book because the author writes about capitalist economic which is free market and people can be rich on their own without any political power to help people and it gives an example of people who were free and became wealthy. In fact, the policy or system which increases the wealth is because of a do-nothing policy rule. This policy also referred to as a free market policy, capitalism, and letting the market to operate. Also, the do-nothing policy is capitalism and has two ways to get people to comparative advantage and exchange. First leaving people free to pursue their self-interest as they define it maximum freedom, which leaves people alone, not influences people’s values and does not try to help people what is good or bad they choose so it will lead to specialization according to comparative advantage and exchange. Finally, the united states political system is uniquely configuring to favor of the “Do-Nothing Policy” and this is why the united states excel at wealth creation and equality. Also, the Big Short is the story of how in a free market capitalist system people become rich by taking an in their
In, The Wealth of Nations, Smith explained why capitalism is the most known economic system. He gives credit to the defenders of the principle parrot his basic arguments. The theme of The Wealth of Nations is what Smith's supporters called the doctrine of laissez-faire capitalism. This doctrine had the world of economics functions under natural laws. It operated exclusively on politics. Government in the economic order of things did not like these natural laws, and said the laws disrupted the nation's economy. The hands-off policy permits citizens to complete economic freedom, and shows that governments could promise the growth of a nation's wealth. Smith realized that under a free enterprise system, individuals would pursue their own self-interests. He said that selfish individuals need competition, so
In his Wealth of Nations, Adam Smith celebrated capitalist society. The central thesis of The Wealth of Nations is that capital is best employed for the production and distribution of wealth under conditions of no governmental interference, or laissez-faire, and free trade. In Smith's view, the production and exchange of goods can be stimulated, and a consequent rise in the general standard of living attained, only through the efficient operations of private industrial and commercial entrepreneurs acting with a minimum of regulation and control by governments. To explain this concept of government maintaining a laissez-faire attitude toward commercial endeavors, Smith proclaimed the principle of the "invisible hand": Every individual in pursuing his or her own good is led, as if by an invisible hand, to achieve the best good for all. Therefore any interference with free competition by government is almost certain to be injurious. The division of labor is another crucial component of capitalist society. According to Smith, division of labor benefits society in three ways:
The economy of the world is changing all the time. We have had our ups and downs, but with the help of insights from economist, we have been able to sustain a decent economy. In Naked Economics, Wheelan discusses how a country can have a successful economy. He discusses why countries are poor and why some other countries are doing lavish things, like buying a cake for a dog. The reason behind it is because the richer countries are more productive and allocate resources and the poorer countries aren’t as efficient and don’t allocate resources. Wheelan also wrote about how Steve Jobs and Bill Gates became as rich as they are. They made huge investments in human capital to become rich. They became rich because they had a product that people were willing to give their money for. There are many problems in different economies and Wheelan explains why they are failing. Some economies suffer from a poorly ran government and others suffer from the lack of information. Trade is a positive thing, but there are people that discourage it because products are imported from outside of the United States.
In A Capitalist Manifesto, Gary Wolfram provides an explanation of how free market systems work in society and highlights their benefits compared to socialist economies. The first chapters of the book are an introduction to microeconomics: how marginal analysis, supply, demand, market equilibrium, opportunity cost, and profits work. According to him there are three fundamental advantages to a market economy: it allocates resources efficiently, consumers determine wages and therefore income distribution is fair, and finally it’s the only method of organizing society that is consistent with individual liberty. He explains that socialism is an economic system that is is unable to provide a decent standard of living for people and that it cannot survive, giving as an example the fall of the Iron Curtain. The reason is that
As Milton Friedman once said, “Freedom is a rare and delicate plant. Our minds tell us and history confirms that the great threat to freedom is the concentration of power. Government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power and political hands, it is also a threat to freedom.” Friedman’s “Capitalism and Freedom” takes us into the mind of an economic genius and shows us his beliefs in a free market and the threat it presents to a dictatorship. Friedman, clearly a supporter of the free market, gives examples to show how a free market can aid a society in striving for success, becoming more dominant, and becoming more powerful. Though, at times he does show how a free market has disadvantages and he makes us aware as to how it can aid people in gaining individualism, knowledge, and overall improving a society. A free market is one that the price of a good or service is determined by supply and demand, in theory, rather than by government regulation. Milton’s thoughts and theory is that through a robust free market with political freedom, economic freedom will follow. Showing how economic freedom is a crucial toward the success of political freedom, Friedman’s theory of a free market and the Do Nothing Principle are major themes throughout his book.
Michael Lewis, The Big Short, film strategically provided three separate but parallel stories of the U.S mortgage housing of 2008. The movie demonstrated how Wall Street, in a desperate search for profits, lunched “bonds” products with riskier mortgages. As a result, lenders were no longer interested in if a borrower could pay them back. In disbelieved, I noticed deceitful tactics that lenders used, throughout the movie, to convince Americans to take out mortgages they could not afford. Chronologically, Americans’ saving levels dropped while countries ' savings tripled. Once the Recession was in full effect, the US government rescued Wall Street, passing an unimaginably large bill, the bill we are still paying off. To most Americans’ surprise, nearly all of the rescue money went into Wall Street executives’ pockets.
The crisis that stressed lots of economies and financial systems originated in US mortgage lending markets. First signals of possible problems came in early 2007, when the Federal Home Loan Mortgage Corporation announced about its inability of purchasing high-risk mortgages, after what New Century Financial Corporation - a leading mortgage lender to riskier customers - filed for bankruptcy (John Marshall, 2009). In the research paper of 2009 he claims that source of the crisis emanated from the rise of house pricing, called housing bubble. “US house prices rose dramatically from 1998 until late 2005, more than doubling over this period, and far faster than average wages. Further support for the existence of a bubble came from the ratio of house prices to renting costs which rocketed upwards around 1999..” (John Marshall, 2009, p 10). Housing bubble was also fully analyzed by Dean Baker in his research “The housing Bubble and the financial crisis” in 2008. Dean noticed that, by the middle of 2007, house prices had peaked and began to head downward.
In “Capitalism and Freedom,” Milton Friedman claims that a capitalist economy means economic freedom. But capitalism can create monopolies, which own commodities exclusively. A capitalist economic system requires a free market and the absence of government intervention in order to function. We can argue that a capitalist economic system does not necessarily mean individual or economic freedom. Instead, it promotes corruption and inequality.
In the book Rewriting the Rules of the American Economy written by Joseph E. Stiglitz, is able to capture the attention of the reader by bringing the problems with the economy to light as he also discusses the solutions that can help restore the economy. I think the problems that are very prominent in The US’s economy today are so unsatisfactory that as a society it is easy to be very aware of what is going on. The United States has always been thought of as this great and equal country where people have always wanted to live because of this big idea that comes along with living in The United States. The big idea that the land of the free also offers people this chance at The American Dream. Sometimes this idea does not always come true. Instead
The Great Recession of 2008-9 was the deepest and longest capitalist economic slump since the Great Depression of 1929-32. The recent financial crisis is known as the “Great Recession” of 2008-9. Its downturn was sparked by the collapse of the US housing market. In 2006, the prices of home began to rise and the banks began to encourage potential homebuyers to take out larger loans. There were lower interest rates at the time, and this seemed like a good idea for most individuals who were searching for a new home. Then, in mid-2007, the interest rates began to rise. The values of the homes decreased and the amount of money a house was worth declined significantly. Many homeowners were stuck with large loans, increasingly high interest rates, and a decreased price of their home. Many homeowners went into foreclosure or were evicted. This eventually led to large financial institutions and banks to become bankrupt, which lead to an overall fall in the US economy. Stocks dropped, consumer spending declined significantly, and companies began to go out of business (Athanasiu, 43).
The economy is arguably one of the most important aspects of a nation. When a country’s economy is thriving, almost everyone will be positively affected. Business will grow, income will increase, and quality of life will be better. One of the major factors in the economies success is the type of economy it is. Because of different experts and scholars, such as Adam Smith and Thomas Malthus, the United States has a successful and fair economic system. Because of this, we thrive as a nation. We can prove this by looking at our high GDP and quality of living. One of the reasons our economy is so effective is because of our economic beliefs. The United States gives the power to the individual and supports business. Free business controls the market,
The growth of relatively free markets and international trade has almost certainly contributed to dramatic increases in living standards across the globe, while also contributing to inequality. Free markets create opportunities for people to create wealth by providing opportunities for people to trade their goods and services to one another through the medium of currency. Economic actions -- buying and selling of things -- are win-win propositions. The baker values my dollar more than the donut, while I value the donut more than the dollar. We both win.
The housing market crash, which broke out in the United States in 2007, was caused by high risk subprime mortgages. The subprime mortgage crisis resulted in a sudden reduction in money and credit availability from banks and other lending institutions, which was referred to as a “credit crunch.” The “credit crunch” and its effect spread across the United States and further on to other countries across the world. The “credit crunch” caused a collapse in the housing markets, stock markets and major financial institutions across the globe.
The Big Short: Inside the Doomsday Machine by Michael Lewis is a non-fiction New York Times #1 bestseller. This text is published by W.W. Norton & Company and contains 320 pages. This is a book that focuses in on the 2008 financial crisis and the build up of the housing and credit bubble during the 2000’s. The author channels in on the persons who saw the crisis coming that wanted to protect their investments or did not want to speak of the issue.
In Diplomacy, authored by Henry Kissinger, the lack of respect to the differing the balance of power principles in separate countries of europe Europe, the bullying strategies by Germany, the poor diplomatic alliances of Germany, Austria, France, Britain and Russia, and the lack of understanding of differing Military policies by Germany all lead to the Doomsday Machine. The Doomsday Machine was made up of all the actions that resulted in the ripping apart of the diplomatic alliances, with each alliance having too much at stake to permit the Concert of Europe diplomacy to function. Instead, the Concert of Europe and its ideas about the balance of power were abolished. Kissinger mainly discusses the multiple diplomatic alliances that led to the inevitable breakout of war. Most of the conflicts could have been avoided, but many of the leaders of the European countries, mainly Germany and Russia, seemed not to consider the long-term implications of their decisions. Germany’s actions started diplomatic disputes with France, Britain, and Russia. The three countries inherently formed an alliance with each other and isolated Germany in Europe.