Our Global Economic System is Really, Really Dumb

The global financial system is now so unbelievably complicated and volatile, preventing huge downturns like today's Asian crisis is nearly impossible.
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Ben Cohen
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The global financial system is now so unbelievably complicated and volatile, preventing huge downturns like today's Asian crisis is nearly impossible.
FRANCE EU FINANCIAL CRISIS

With the Chinese stock market going into free fall, and stocks plummeting around the world, the financial industry is panicking. When the money men start panicking, it's probably prudent for pretty much everyone else to start panicking too.

As of today, the Dow Jones has plummeted 1000 points, theFTSE 100 is still down 5%, and will hit its lowest level since December 2012, and over €500bn has been wiped off the FTSeurofirst 300 index. In plain English, this is very bad and could get a lot worse.

If you are not financially literate and don't understand what these numbers mean, don't worry, the people in charge don't have a clue either - otherwise these massive financial shocks wouldn't be happening. The truth is, the global financial system is now so unbelievably complicated and volatile, preventing huge downturns like today's is nearly impossible. Electronic money zips from one side of the world to another in the blink of an eye with little to no regulation or control, meaning entire countries can be bankrupted overnight should investors panic and pull their money out. This frenzied form of capitalism began with the dismantling of the Bretton Woods system in the 1970's, freeing up capital for massive speculation, financializing the economy and paving the way for a new global elite who would then wreak havoc on working people everywhere.

In the modern financial era, there are few regulations on capital flow (the movement of money for the purpose of investment), which basically means the wealthy have an inordinate amount of power over entire nation states.

Take for example, the Asian stock market crisis of 1997 - a catastrophe that threatened to bring the world economy to its knees. Much of this had to do with panicked investors and lenders pulling money out on an already precipitous crisis, decimating several countries' economies over night. The crash in 2008 was no different, and the human toll immense. An estimated 5,000 suicides occurred in the US, and over 10,000 extra suicides were recorded in Japan, Hong Kong and Korea because of their respective disasters. This of course is just the blessed market at work.

We have essentially built a global economy based on fear and irrationality - commodities that can be turned into huge profits by those with capital and immense misery for everyone else. While the latest Asian crisis has most people panicking, savvy investors are gleefully watching the unfolding disaster, knowing they stand to profit from hundreds of millions of people's misery. This is an important concept to understand when it comes to making sense of how global financial markets work - it is a highly risky system prone to huge crises, and all for the benefit of the ultra wealthy who take huge risks then get bailed out by the tax payer.

Why do we continue to allow this system of madness to continue?

The answer is simple: it is the religion of the market - a patently absurd belief system foisted upon the world by wealthy zealots who never abide by its laws. When the rich go broke, we bail them out. When the poor go broke, we get welfare reform and privatization.

We don't know how bad this latest economic crisis will be, but we know it will cause untold damage to businesses and workers around the world. It could get bad, very bad, and we'll be told that this is to be expected in a free world of unregulated capitalism. The stupidity of this is incredible - it could be fixed and made to work in the interests of the general population. But this can only happen when average people begin to understand that capitalism, just like any other cult, can be dismantled and exposed for the racket it really is.