Capitalism is all about the Demand and Supply of money;
1) The flow of Hot money is borderless and will find its ways to the economies that generate the highest returns. It will flow out from economies that is not as efficient, where the government’s sovereign debt is unable to meet its obligations.
2) Therefore reforms must be made to keep the House in order, a balanced budget and reforms to industries that do not meet global standards of governance and disclosure.
3) The management of Risks in a global marketplace.
4) The emphasis of sustainable growth instead of pure growth of the GDP.
5) Every country, every industry has its unique problems and solutions must be found to tweak it back to health.
6) Once the House is back in order, the Crises of Confidence will disappear and liquidity will return with the liquidity of credit.
7) Over emphasis on low interests and borrowings is not sustainable in the long run and savings must be encouraged instead.
8) A lender of last resort (eg IMF) can only solve short term liquidity problems, not long term.
CAMBRIDGE – Modern macroeconomics often seems to treat rapid and stable economic growth as the be-all and end-all of policy. That message is echoed in political debates, central-bank boardrooms, and front-page headlines. But does it really make sense to take growth as the main social objective in perpetuity, as economics textbooks implicitly assume?
Certainly, many critiques of standard economic statistics have argued for broader measures of national welfare, such as life expectancy at birth, literacy, etc. Such appraisals include the United Nations Human Development Report, and, more recently, the French-sponsored Commission on the Measurement of Economic Performance and Social Progress, led by the economists Joseph Stiglitz, Amartya Sen, and Jean-Paul Fitoussi.
But there might be a problem even deeper than statistical narrowness: the failure of modern growth theory to emphasize adequately that people are fundamentally social creatures. They evaluate their welfare based on what they see around them, not just on some absolute standard.
The economist Richard Easterlin famously observed that surveys of “happiness” show surprisingly little evolution in the decades after World War II, despite significant trend income growth. Needless to say, Easterlin’s result seems less plausible for very poor countries, where rapidly rising incomes often allow societies to enjoy large life improvements, which presumably strongly correlate with any reasonable measure of overall well-being.
In advanced economies, however, benchmarking behavior is almost surely an important factor in how people assess their own well-being. If so, generalized income growth might well raise such assessments at a much slower pace than one might expect from looking at how a rise in an individual’s income relative to others affects her welfare. And, on a related note, benchmarking behavior may well imply a different calculus of the tradeoffs between growth and other economic challenges, such as environmental degradation, than conventional growth models suggest.
To be fair, a small but significant literature recognizes that individuals draw heavily on historical or social benchmarks in their economic choices and thinking. Unfortunately, these models tend to be difficult to manipulate, estimate, or interpret. As a result, they tend to be employed mainly in very specialized contexts, such as efforts to explain the so-called “equity premium puzzle” (the empirical observation that over long periods, equities yield a higher return than bonds).
There is a certain absurdity to the obsession with maximizing long-term average income growth in perpetuity, to the neglect of other risks and considerations. Consider a simple thought experiment. Imagine that per capita national income (or some broader measure of welfare) is set to rise by 1% per year over the next couple of centuries. This is roughly the trend per capita growth rate in the advanced world in recent years. With annual income growth of 1%, a generation born 70 years from now will enjoy roughly double today’s average income. Over two centuries, income will grow eight-fold.
Now suppose that we lived in a much faster-growing economy, with per capita income rising at 2% annually. In that case, per capita income would double after only 35 years, and an eight-fold increase would take only a century.
Finally, ask yourself how much you really care if it takes 100, 200, or even 1,000 years for welfare to increase eight-fold. Wouldn’t it make more sense to worry about the long-term sustainability and durability of global growth? Wouldn’t it make more sense to worry whether conflict or global warming might produce a catastrophe that derails society for centuries or more?
Even if one thinks narrowly about one’s own descendants, presumably one hopes that they will be thriving in, and making a positive contribution to, their future society. Assuming that they are significantly better off than one’s own generation, how important is their absolute level of income?
Perhaps a deeper rationale underlying the growth imperative in many countries stems from concerns about national prestige and national security. In his influential 1989 book The Rise and Fall of the Great Powers, the historian Paul Kennedy concluded that, over the long run, a country’s wealth and productive power, relative to that of its contemporaries, is the essential determinant of its global status.
Kennedy focused particularly on military power, but, in today’s world, successful economies enjoy status along many dimensions, and policymakers everywhere are legitimately concerned about national economic ranking. An economic race for global power is certainly an understandable rationale for focusing on long-term growth, but if such competition is really a central justification for this focus, then we need to re-examine standard macroeconomic models, which ignore this issue entirely.
Of course, in the real world, countries rightly consider long-term growth to be integral to their national security and global status. Highly indebted countries, a group that nowadays includes most of the advanced economies, need growth to help them to dig themselves out. But, as a long-term proposition, the case for focusing on trend growth is not as encompassing as many policymakers and economic theorists would have one believe.
In a period of great economic uncertainty, it may seem inappropriate to question the growth imperative. But, then again, perhaps a crisis is exactly the occasion to rethink the longer-term goals of global economic policy.
Globalisation ; It is Reform, Reinvent with Changes, and Sustainability
The Key to the old Economic model of growth is sustainability, where reforms, reinvent and changes depends on your goals and objectives, profits can still be derived with a slower growth and a world population of 7 billion people, the old Economic model of blazing growth is not sustainable with an ageing population and use of scared resources, going green will save the earth from total destruction from the mistakes from the past, to give us a more prosperous future.
You can play around the factors to best achieve your goals and objectives, without sacrificing the GDP, by setting priorities and proper planning, although it is moving into “unchartered waters”, but by modelling with an extensive framework, various views can be achieved.
Concept Theory 1
“Money will flow into the most free market offering the maximum returns.”
Concept Theory 2
“How to maximise Capitalism? Where Demand=Supply will give you the maximum returns.”
Concept Theory 3
“The New Economy is a Perfect Market, where the old economy is an imperfect market. Markets will react immediately with the free flow of information to correct any flaws in demand and supply.”
Concept Theory 4
“Globalisation is the co-operation of every markets, every governments.”
Concept Theory 5
“By solving Capitalism, and the use of money, resources will be maximised for maximum gain.”
Concept Theory 6
“With the Internet, information flows freely and the markets reacts immediately.”
Concept Theory 7
“Investments is engaging the markets all the time, hedging against your risks, for returns.”
Concept Theory 8
“In either a Bull or Bear market, money is still made, all of the time.”