Capitalism, alive and well, thank you

In an appearance at the London School of Economics today, Fed Chairman Ben Bernanke reassured everyone that the current economic upset is “not a crisis of capitalism.” In fact, I can personally attest that the heartbeat of capitalism, while at times  erratic, is thumping away quite vigorously.

From where I sit, the credit crunch is a tornado that lifted many homes and businesses around me, but has miraculously missed my tent. The mail brings almost daily offers of credit to my family (including lovely offers to the minors in the household) — an astonishing thing. I’ve been waiting and waiting for my mailbox to disappoint. When will the lenders of the world stop offering to leverage up the family balance sheet? I currently carry two credit cards with very nice balances, thank you very much, and no incentive to repay in full. Why? The interest rates are 0%. The companies are disappointed that I haven’t maxed out on the free ride and keep reminding me that I can borrow more, more, more. My Citi MasterCard, once our plastic of choice, is about to retire: Not only does the airmiles deal stink versus American Express, but now the bank had the temerity to raise our carrying balance from 2+ percent (also not worth repaying so fast when our savings earns 4%) to 7.72%. Hasta luego, Citcard. We’re sending you home along with Robert Rubin.

And amid word of the credit crunch, we have just been approved to re-finance our mortgage even as home prices fall. In all fairness, I should note that we bought our co-op apartment more than a dozen years ago when prices were half where they now stand, even at today’s recession-era levels. That said, after all that has transpired in the past year, the application process has been remarkably unremarkable — neither notably stringent nor notably lax.

There’s no denying the economy is in a major league funk. Yet the degree of pain has not been spread nearly as uniformly as one would think. I’ve read about many businesses, especially small businesses and the lifeline of the economy, struggling to get credit. But if middle class folk like my family can still access the credit markets, maybe things aren’t as dire as we think? Is this a ray of hope or just sloppy marketing?

‘Tendency to boom and bust’

Bernanke noted in the Q&A session at the LSE that there is a “tendency of the financial system to boom and bust.” That tendency has posed what he also called a “longstanding” tension between allowing markets to work freely and to regulate. At the moment, the regulators are in Code Blue mode. They might be interested to know that in different pockets of the country, some things are working a.o.k. Not that we aren’t worried. Bernanke also referred to a “lack of understanding about the power of markets.” Indeed, psychology can turn on a dime. After going through the offers in my mailbox today, I’m feeling a little more hopeful than I have in a while.

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2 thoughts on “Capitalism, alive and well, thank you

  1. Of course the US economy will continue to be a primarily capitalist society. I have not heard anyone suggest anything different.

    Hopefully, there will be more and better “adult supervision” than we have had recently. We don’t really need more regulation, but we do need better regulation.

    • Yes, you’re right. Of course, the US economy will continue to be primarily capitalist. I was a little surprised to hear Bernanke go out of his way to assert that the current crisis is not a crisis of capitalism. I found the comment interesting because it reveals just how shaken he is — and possibly what he is hearing about the foundations of capitalism behind the closed doors of the Fed. It struck me as a bit divorced from daily life — and my small experiences in the credit markets. Credit crunch, what credit crunch, one friend basically asked me. But I can imagine from the corridors of the Federal Reserve all is gloom and doom. And, well, the regulators wouldn’t be doing their jobs if they weren’t worried.

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