About Capitalism and Socialism

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Michael Höhne's picture
Michael Höhne
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About Capitalism and Socialism

I'm not an expert in economics at all, but I'm able to think and have ideas nonetheless. A lot of posts have been made recently discussing whether we have capitalism, socialism or a mixture of both and some of these posts became too aggressive in my opinion, which I think is just a result of the current situation and the fact that we have learned socialism to be bad and capitalism to be good. Both systems have failed or are about to fail, so what about forgetting about these words at all and trying to find solutions instead?

I read "What If ..." by Matrix (http://www.peakprosperity.com/forum/what-if/9651) and most of the comments. I agree that it won't work entirely, but it could up to a certain level. Say that the government is in charge to provide free houses, food, water and energy. Maybe 200 square feet for adults and 100 for children, giving a family with two children 600 square feet (about 55 square meters). That's not too much, but say it's for free.  If you want a bigger one, then you have to pay for it.

Basic food supply like bread, noodles, rice, eggs , vegetable, fruit and so on is free as well, while you have to pay for anything else. Water is free and energy is free up to some amount, maybe 500 kWh per year (totaling 2,000 kWh a year for a family with two children). If you need more, then you have to pay for it. And prices per kWh should be much higher than today.

There is no health insurance anymore. Doctors and hospitals are free and are paid a fixed rate by the government, just as you are paid a fixed amount from your employer.

Next consider free public mass transit, with main routes being served every 10 minutes or even 5 minutes or less. Of course you need the infrastructure first, but it's certainly better investing there than in the financial system. Just imagine how many workers you need to build and maintain that infrastructure. And you really get something back for it. If you want more than that, then buy a car. But it should be much more expensive and gas should be much more expensive as well. Think of cars as being luxury. That certainly hurts, but if a free mass transit is in place, then you may not need a car  anymore.

Assume - just for a minute - that such a system is in place. You have a really basic living standard if all you can afford is what you get for free. But at least you have a place to live, something to eat and drink and you can travel for free. This still is much better than what most other people have today. And it totally rewards working, because you can spend your money for additional items that are not free. And if you lose your job and don't have an income, then you're backed up by the system. I'm also sure that it leads to less crime.

So how could you establish such a system? Unless all countries in the world do the same, which is very unlikely to happen, you could say that each citizen of the US (or any other country, just using the US as an example) is entitled to use the free offers. If you are working inside the US, then you have to pay a fixed percentage of income tax, say 20% or whatever turns out to make sense. If you are not working in the US, then you are not entitled to use the free offers, unless the country you live in does the same. This is to limit fraud but I don't want to overcomplicate it.

The following calculation may not be correct and is not based on real numbers, so feel free to correct where appropriate. Say that the average income of an employee is $50,000 a year and you have 100 million jobholders. That gives 50,000 * 100 million * 20% = 1 trillion of income tax. Ok, I used these numbers to have an easy calculation and to make it even easier, you don't get anything to deduct from your taxes. So if you are paid $2,000 a month, then you get $1,600 and the state gets $400. No further taxes, so it's a fair deal. As you don't have to pay for the basic stuff, you can either save that money to afford a bigger home in the future or buy food and drinks you like more than what you get for free. Or you buy a car, a chunk of additional energy for your household or whatever.

So is a trillion enough to support free apartments and houses, free food and water, free mass transit, free medical supply and anything else that's required for a basic living? I don't know, because I have no clue what the total cost is. If it's less, then income tax can be lower, if it's more, then it has to be higher. If a 100% income tax isn't enough to pay for it, then there is a general problem. Of course you have to also pay for free schools and a lot of other stuff, but I hope you get the idea.

Before you mangle me, I have to admit that I don't know how to make that happen. There are brighter people out there knowing much more than I do, so just take it as an idea. But if you only have 2,000 kWh for free and can't afford more, then you will ask your neighbors if they want to watch the next movie on TV (given they have one) together to save energy. And you may have a bottle of wine and share it and very soon you have a great community. Even if have enough money to get anything you need, it may be a good feeling serving the ones living next to you. That lowers envy and you are one of the good guys.

I think it's hypothetical, because it must be a horrible idea for the "haves and have more", which are the ones deciding. But I like the idea of having a better live in general. I don't call it capitalism and I don't call it socialism. I call it freedom.

  

Aaron M's picture
Aaron M
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Re: About Capitalism and Socialism

I'll try to avoid the mangling, but when you said:

Quote:

I have to admit that I don't know how to make that happen

You inadvertantly admitted the flaw inherant to socialism.

As a person, I believe that MY time should be invested to make MY life better. I'm not interested in pulling overtime to help the drug addicted tenant in the local section 8. After all, he's not working at all - and he's probably making as much as me. It is not my job to provide for ANYONE other than my family.
People say "Socialism works on a small scale". I agree. My family.

Being handed free mass transit is a recipe for disaster in the age of global terrorism. We can bury our heads in the sand, pretend that if we don't harm them, they'll leave us alone or we can accept that these people are, as John Locke wrote "Neither reasonable nor rational" and aim with their very exsistence to do us harm. Creating a situation where you considiate targets and make it difficult for people to operate with autonomy is a silly idea.

Socialized medical care... where to start. First, I live under this system. I also live under a system where I have free food, housing, allotments of household items, and discounted food if you want "extra". It's called the military.

The military has done for medical care what McDonalds did for the Hamburger. They made it cheap, available to everyone and of terrible quality. The same is true of the dormitories.

I cannot emphesize enough that Socialism is inherantly oppressive, and is a top down leadership scheme, which consolidates power within the hands of a few "elites" - who are, more commonly than not, completely incompetant.

Socialism is a dream. An Ideal. A system where everyone is truly equal.
Representitive Democracy is a dream. An Ideal. A System where everyone is truly equal.

The difference is, Socialism is about equal limitations, while a Republic provides equal opportunities.
Our capitalism has been tainted by socialism and perverted by a fiat money system. Our Republic has been sold like a whore by insipid Ivy League politicians who'd sacrifice the ideals of our union to line their pockets and consolidate power.

Socialism is a system of governance. Capitialism is a system of economy.
The two can't even be compared on an even playing field. 

Cheers!

 

(PS - serve in the military. If you still like socialism, stay in!)

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dirtydonkey
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Re: About Capitalism and Socialism

I cannot emphesize enough that Socialism is inherantly oppressive, and is a top down leadership scheme, which consolidates power within the hands of a few "elites" - who are, more commonly than not, completely incompetant.

 

 

How does that differ from the American system? I'm a bit puzzled.

 

dd 

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Re: About Capitalism and Socialism

Let me try to explain the difference in the most dramatic and concise way i can think of.

You would live a very primitive and short life if you had to feed, clothe and shelter yourself with no outside help  Enter the division of labor. As people develop skills, their productive output increases with constant practice. Long before capitalism, before written history, man lived in tribes where they pooled their different skills. The invention of money allowed men to trade the output from their labor through a common measure of value. Our market economy grew by this continuous process of division of labor skills and trade through the medium of money. This is a peaceful process and requires an extremely high degree of social coordination and cooperation. That is the capitalist model.

Now imagine a small minority in the tribe hate work, so they pillage their neighbors. This is a self-destructive model if carried to its logical conclusion. Now imagine a small minority are too weak to overpower their neighbors. So they hire a gang to steal for them  in exchange for a promise not to rebel against the gang. This too is a self-destructive model. This process of stealing the production of others is what defines socialsm. This is why socialist nations are always poor.

The differences could not be more stark. History shows that once a nation gets a taste of socialism, it begins the process of social decay. Over time that small minority turns into a large majority until it breaks down. America is breaking down for that reason.

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Aaron M
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Re: About Capitalism and Socialism

DirtyDonkey,

I hope that you never experience a society that is truly oppressive. A society which will see you sent to a Gulag for expressing a faith in an entity outside the state. A society in which your merits and achievements are rewarded with the "thanks", with no substantial improvement of living conditions for you and yours.

Perhaps you'd benefit from focusing more on the reality of America today as opposed to liberal hyperbole that insinuates that you're oppressed without any significant experiences from which to draw.

Hewittr,
Well put.

I came from a community that was had many Eastern European immigrants, and I was raised with stories despotism that Americans simply cannot fathom.

The problem with our society is we have not kept our end of the bargain:

The price of liberty is eternal vigilance.

We have neglected our civic duty to control our government, and in our absence, they've trained several generations to be empty-headed and shallow materialists who would gladly trade their constitution for the gilded cage.

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Re: About Capitalism and Socialism
Ronin wrote:

The problem with our society is we have not kept our end of the bargain: The price of liberty is eternal vigilance. We have neglected our civic duty to control our government, and in our absence, they've trained several generations to be empty-headed and shallow materialists who would gladly trade their constitution for the gilded cage.

 

Bravo

 

 

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Damnthematrix
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Re: About Capitalism and Socialism

or we can bury our heads in the sand, pretend that everything will keep going...?I don't think you have any idea just how much your life is about to change.... go back and do the Crash Course AGAIN! That's an order! Cool

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Damnthematrix
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Re: About Capitalism and Socialism

So now America's a socialist country?  I think you're twisted.....

America is going to the dogs because it's overpopulated, and the elites are keeping way too many people poor.  So much for Capitalism.  capitalism and your free market sucks man, REALLY SUCKS...... 

I wasn't going to let you wind me up hewittr, buit now you've really done it, you're going to the 'ignore' bin. Goodbye

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Semi-Socialism

Michael,

Your describing a semi-socialistic type society. I live now in that kind of society in Taiwan. Most medical is taken care of, and education for the most part is free to University level based on how you score.

Socialism- It's an ugly word for most people because they believe it can lead to communism, another ugly word in our society. This is a misconception for most.

You really can't get away with any sort of microcosm or complete society as a whole without a leadership system. If you want to call it government, so be it, but even in the smallest tribes you have elders or leaders, they difference is that they just don't get rich off it. They make decisions, pass judgement and guide the tribe in a certain direction.

It's interesting to note that tribes untouched or practically isolated (yes we still have some) still have a hierarchy in the tribe, and it's usually based on age and survival, meaning the longer you live you must have done something right, been wiser, been stronger than others. This is why they are looked upon to make decisions on a tribal level.

The American Indian tribes were like this. They were untouched by modern civilization for a very long time, and naturally made many systems basically with the same foundation. Like a unaffected progression based on mistakes or successes only.

How did they do it? Was this socialism? A democracy? Communisum? No, I think it was something we cannot catorgorize or fit into today's lifestyle because we have been conditioned so far into the consuming, easy life that we have now. I know a lot of you will disagree with the statement I just made because maybe financially your having a difficult time right now. But imagine for a moment if you had to forge daily for food, clothing, wood etc. Or perhaps fight for your very life or your families. It might or would take time, and time is the most important thing to everyone today. Quicker, faster, constant gratification type strobelight lifestyle, combined with many electronic diversions to pacify and distract us. Money only accelerates your lifestyle, and gets you things quicker.  

To have a job composed of the daily needs they had is primitive to us now, and our more modern society of the time crushed these tribes into practical non-existence. It simply was not profitable to have all these Indians around living freely on and off the land.

To combine the tribal system they had with the modern system we have only has one problem, nobody wants to hunt. We have been conditioned for far too long to have to actually work for food. Hunting, skinning, cooking or drying the meats alone is a daily job. Planting crops is a huge task. Harvesting is a massive task for a group of people. Building a shelter and moving from place to place depending on seasons is a grueling task. But they did it. Everyone pitched in. They took care of the kids, elders and themselves. Maybe they didn't have the modern conveniences we have now, but it worked. Did they have crime, sure. Did they battle, of course. But it was a tribe vs. tribe, and usually over hunting grounds or sacred areas.

No, I don't think any of these ideas will take form until we are forced to do them, by need or by involuntary methods, such as a controlling government, much smaller leadership system or no system at all. It will take un-learning, brain detoxification, de-programming and lots of time to ween the masses off our current system.

 

 

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Michael Höhne
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Re: About Capitalism and Socialism

I expected these replies, so I'm not offended in any way. However, I don't like the "It's all about me" mentality. Serving in the army may be better than doing nothing, but who's paying for it? It's the tax payer. And that's not only true for the military, it's the same for many other expenses. Otherwise there wouldn't be any need for taxes at all, right?

Taxes are a way to collect money to finance things of public interest. It's used for infrastructure, education, wars and much more. If it's all about me, then I don't want to pay at all, because I don't need new streets, I'm educating myself and I definitely don't need wars. But hey, I have children and they have to be educated as well and they probably like a good infrastructure too.

Let's face it: there will be way more job losses in the next months or even years and many people will find themselves without a home and without money. What are you going to do? Help them or not? There are always people who don't want to work at all. And there are always people taking drugs. But that's true for any system and isn't in any way related to socialism. You pay for them anyway, so just ignore the fact that they exist. How many retirees do you have and how many children do you have that are either too old or too young to work? And what if the retirement arrangements do no longer work and you suddenly have some million senior citizens not knowing how to survive? Is it still all about you?

I don't like wars and I don't like terrorism, but there's always a reason for it. We can try to keep the current status as long as we can, but while doing so, we should also think about how it could be changed. And before thinking about that, we first have to agree on how the future should look like. You cannot define the way without knowing where to go, though exactly this is happening now.

Again, forget about socialism, communism, capitalism, semi-socialism and so on. Think about a world you'd like to live in and based on that try to find ideas how to get there. And feel free to share these ideas instead of just criticizing.

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Damnthematrix
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Re: About Capitalism and Socialism

In fact, we need a completely new ism based on sustainability.  Can't think of a name right nowm doesn't matter, but if we can't work out a way to be sustainable, then we truly are screwed..... http://www.futurescenarios.org/content/view/16/31/

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Re: About Capitalism and Socialism

Michael, 

As a child I have lived in "communist" eastern europe. My parents have lived in it all their youth. Despite 20 years of transition to the "free market capitalism", some of the "benefits" of  socialism that you praised in your post have outlasted until today here in the Czech Republic. It is because people got used to it and no government will ever dare to abolish these benefits, neither a right wing government which is qute rarely formed (and BTW our "right wing" is still more leftist than US Democrats).

We have a free health care. In fact, you pay some participation for drugs and you can pay for some "luxury" services, like nicer artifical tooth at the dentist or for a better room with a TV/internet in the hospital, but you can't pay for a medical care itself, even if you want. For example, if you need a hip joint replacement, you wait 2 years until you can take the surgery. It is so simple - when the money does not set the limit, something else must set the limit and if you let the departmental ordinances to set the limits, then you will get rewarded by 2 years in pain, waiting for your new hip joint. To be honest, they recently managed to shorten the waiting time to 1 year and pride themselves greatly over this success :-) In reallity, people bribe the doctors to get the surgery earlier. Even an half-legal but tolerated system originated: You need a hip joint surgery, you have money (say $1.000 - $2.000, it is not so expensive operation anyways) and you don't want to cripple along for a year or two when you will get the "free healthcare". Then you simply make a donation to the hospital and wonder happens - you can undergo the surgery next month. Look how the free market finds its way into this regulated system.

The current "right wing" government is very unpopular, because they introduced "see doctor fees" in effort to stem over using of free health care. You have to pay 30 CZK ($1,5) when you come to doctor, the same ammount for every item on the drug prescription,  60 CZK ($3) for a day in hospital and 90 CZK ($4,5) if you come to emergency. For many people here this is thievish abuse of our free healthcare.

Of course, the doctors don't work for free, although their wages are regulated too, so they are much cheaper than in US. From every employee's salary, the state takes about 10 % for "health insurance" (which is no insurance at all, it is just tax). However this money does not go to any personal account, it is not even bind to the health care, rather it goes to the state budget and they redistribute it somehow.

Similarly, another 25 % goes to "social insurance", from which the retirements, unemployment benefits and other services are supposed to be paid. You can see that just these two taxations consume 35 % of employee's wage. From the rest you have to pay income tax (about 20 %) and when you spend the rest, you still pay the VAT (9% or 19%) on all goods and services. Fuel and cigarettes are extra taxed sky high, so that 1 gallon of gasoline costs about $5 in these days when oil is below $50/barrel. Although the average employee is taxed to death (about 50 % or more depending on the income), the budget is still deficient, debt is rising and nobody seems to be much worried about it, because "our debt to GDP is quite low".

On the other hand, you pay nothing (or only some chickenfeed money) for healthcare, schools (all free including colleges). I must agree with the statement that whatever is free is being abused and the service quality deteriorates. This is true about our healthcare, social wellfare, pension system and education.

In the communist era, we have not free, but very cheap (subsidised) housing and mass transit - and both was appalling.

I could write more and in more detail, but it is already a long post, so feel free to argue and/or ask question. But having my experiences and my parent experiences, I would never experiment on socialism. Really, never ever.

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Michael Höhne
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Re: About Capitalism and Socialism

Well, don't get me wrong: I'm not experimenting with socialism. I live in Germany and not too long ago we had Eastern Germany and Western Germany. I was in Western Germany and had all the benefits compared to the eastern part. I never wanted to live in Eastern Germany, because it seemed so underdeveloped and different. I enjoyed the advantages of our system my entire life, but where are we today? I haven't thought it could happen and before watching the Crash Course and reading the forums I even wasn't much aware of it all. Even then I wouldn't have believed if the current economic situation was "normal".

To make it easier once more: forget about the *isms and try to look forward. We cannot change history, but we can change the future. And I'm repeating myself here: without ideas you cannot change anything. I like the idea of free mass transit and it has nothing to do with socialism. I also like the idea of free housing and anything else I wrote before. Again it has nothing to do with socialism.

We currently have an outdated social security system that is about to fail in the future. Health insurance is getting more expensive almost every year, while benefits drop. Our state pension funds won't be able to pay in the near future, because more people retire and they get older as well. For that reason the age of retirement already changed from 65 to 67. If you retire earlier, then you get less money from the state. So at least this is addressed, but not entirely solved. To continue this model, we need a growing population, because more workers can pay more taxes. But this won't work in a financial crisis like the one we are facing today. Instead more people will lose their jobs and usually the older people are asked first, letting them retire in the age of 58 or even earlier. That puts even more pressure on the system: it's not only less taxes, it's also more money for pensions or unemployment benefits. And the only way to finance is more debt or higher taxes. As we all pay taxes, you could name the existing system "socialism" as well, but as said, I'm not very much interested in words and their meanings. We tend to call our system "social market economy".

  • So what is bad about a free mass transit, if you always can buy a car if you have enough money?
  • What is bad about free staple foods, if you always can buy additional items if you have enough money?
  • What is bad about free medical assistance anyway? If you want additional benefits, then you can pay for it as well or pay for health insurance.
  • What is bad about free housing, if you can always rent or buy a bigger one, given that you have enough money?

Do you really think that most people won't work anymore when the above is for free? I can't imagine living like this for very long. But I would be glad to have it when being unable to find a job. Just my opinion.

And one last time: don't just say that something cannot work without telling how to do better. I hoped to see a discussion about how our future could look like, not what has failed in the past. However, I liked your response because of the insights of your country and why it's not working in the Czech Republic as well. What about using your own experiences and trying to modify what I wrote so that it makes sense to you? If you think that it's complete nonsense, well, then you don't have to. But even then you may have ideas how to make things better that are worth sharing.

 

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Aaron M
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Re: About Capitalism and Socialism

DamntheMatrix,

Nice job saying nothing - while managing to be insulting.

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jmar8692
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Re: About Capitalism and Socialism

Michael,

first of all, no offence. I am glad to participate in this discussion. If I use capitals, it is for emphasize purposes, no shouting :-)

Michael Höhne wrote:

To make it easier once more: forget about the *isms and try to look forward. We cannot change history, but we can change the future. And I'm repeating myself here: without ideas you cannot change anything. I like the idea of free mass transit and it has nothing to do with socialism. I also like the idea of free housing and anything else I wrote before. Again it has nothing to do with socialism.

these have EVERYTHING to do with socialism. These all will NEVER be free, rather you should say you want them to be funded from public budget. The money come from taxes (or worse from debt). Either way, the citizens WILL pay for these services (sooner or later) and they will NOT be free in effect. 

Once you make them "free", people will start over using or abusing. So they will pay more in the end, because of all the waste.

Michael Höhne wrote:
  • So what is bad about a free mass transit, if you always can buy a car if you have enough money?

This is perhaps the one which I could personaly imagine to be possible as people would hardly abuse this benefit. Here in CZ, in some small towns they have a free mass transit. In the large cities, you have to pay for tickets, but usually you can buy a long term ticket for cheap. For example in capital city of Prague, the year ticket costs about 4.500 CZK ($225), however, the ticket fees cover only 25 % of total costs, the remaining is paid from municipal budget. Well, you can think about it as 75 % "free". Last year an accounting survey in the Prague public transport company that 25 % of its "white collar" employees did almost nothing but playing computer games. If I remember it correctly, there was a guy who played some internet game 6 hours a day on average. This will of course happen once you fund any company from the public budget, protecting it from competition.

Michael Höhne wrote:
  • What is bad about free staple foods, if you always can buy additional items if you have enough money?

Who will be in charge of these quotas, how will it be distributed, how will you prevent people from selling their quotas on blackmarket and if you let them, are you aware of the waste that will neccessarily originate?

Michael Höhne wrote:
  • What is bad about free medical assistance anyway? If you want additional benefits, then you can pay for it as well or pay for health insurance.

I agree that some very basic medical treatment should be allowed to everybody. However, is not it already provided? What are your "additional benefits"? If you calling for full health care service for free with optional paid luxury services (which consist less than say 10 % of the total costs) - are you then aware that you can spend virtually ANY ammount of money on health care? Who will set the limits? Because there MUST be some limits, otherwise you could not finance the enormous costs. Where your wallet doesn't decide, other people are making decisions. Are you prepared for your cancer treatment being terminated prematurely, because there were recently too many patients with cancer treated and the funds are depleted? These things happen every day in healthcare systems which are funded from public budget...

Michael Höhne wrote:
  • What is bad about free housing, if you can always rent or buy a bigger one, given that you have enough money?

How do you plan to achieve it in the first place? Where will you find house or flat for everyone? This is utterly impossible, unless you do some kind of communist thievery by nationalizing real estates giving their owners nothing in reward. What if there was not enough flats? The state would have to build flats on its own (which exactly the communists did). Another inefficient state owned company... Who would pay for the maintenance? The costs would be enormous as once there are some people who don't appreciate much anything which was given them for free. Have you ever seen a ghetto? This is the sort of people who usualy pay little if anything at all...

And what about renting your "free housing" flat on the black market? And what about poor worker paying taxes to be spend on free housing for the rich M.P.? Again, I am not conspiring against a good idea, I am talking about my experience. Here in CZ we have another relict from the communist era - regulated rents. About 1/3 of all flats has its rent regulated by law. These regulated rents are at some places as low as 20 % of the ammount usual on the market. There are people of all sorts living in these flats - from a poor 80 years old pensioner to a rich leftist M.P. who commit himself in preserving these regulations as necessary (pointing out the 80 yeared pensioners, while other poor pensioners who were not so lucky to end up in a regulated flat has to pay full market price, which is higher because of regulation on 1/3 of the market).

I didn't provide much thoughts for the future as you requested and I admit that. If I get some time during the weekend, I will certainly add some thoughts. For the beginning, I believe that following some Chris's advices is a good start. So - we must stop living on debt. We must have a sound currency. Once we have a sound currency, we must start saving. Recently I read a book "The richest man of Babylon", I gladly recommend it - there are some supertemporal advices about wealth and success. Once we have savings in sound currency, we are becoming wealthy. Sound investing multiplies the wealth and creates the jobs. Mankind lived like this for thousands of years and they survived without our knowledge and all the supertechnologies. I wonder why we would not just manage to continue in doing this, after we eliminate the excesses in our economy.

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Michael Höhne
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Re: About Capitalism and Socialism

I really appreciate your comments and you are right on everything you say. It's not that I'm not aware of it at all. It's just that our current systems don't work. Pure socialism isn't productive and pure capitalism favors very few people. Neither you nor me lives in one of these extremes, so it's always somewhere in the middle. Our governments have to set rules to keep things running and obviously they failed in the last decades. Maybe they just didn't know better, and now it really isn't a good time for dramatic changes. Always better doing them when things are good, but knowing this doesn't help now.

We will see our governments making tough decisions while being under horrible pressure. And that bears a high risk of failing. I also totally agree that saving and stopping excessive consumption is very important to get things in balance over time. What I'm still interested in is how to prevent these bubbles in the future. All of the money being injected could be used to create an ever bigger bubble. I really hope that we learn this lesson and decide to invest in things we really need instead. Guess that's the entire story behind my original post.

And thanks to all others having replied as well, but please follow general discussion rules. Personal disputes should be taken offline.

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