Graziadio Business Report Blog

The financial turmoil of the last eighteen months has brought to everyone’s attention the problems and dichotomy of our present monetary and financial systems. While we are now dealing with the consequences of too much credit, it is also important to note that a system without credit (and—much to the delight of the populists—without bankers) would be a much poorer and less innovative social system.

So far, the attempted solutions suggested have varied from more leveraged credit to the substitution of the fiat currency system and the central bank with a gold-linked scheme.

The problem with most of these suggestions is a massive confusion about how the U.S. system really works, how it should work, and how we would like it to work (and here it gets really problematic as every individual interest invariably jockeys for a better position).

The issue with a fiat currency system is that it is backed by the credibility of the government and the central bank, which should be acting independently as a guardian of the currency. Governments have inherent conflicts of interest and may feel pressured to regularly weaken the currency as a means of veiled taxation; other sectors of the population will also look favorably on consistent inflation to reduce the burden of borrowing. The central bank is supposed to act independently to counterbalance these inherent social and political dynamics. Unfortunately, in the case of the U.S. and many other countries, the central bank, is hardly independent or focused on one true objective of financial stability. In reality, a central bank’s independence is very limited; true independence would require practically no accountability and a large degree of secrecy, which comes, of course, with its own problems.

The fine balance between a government’s and a society’s pull toward credit excesses and the countervailing force of the central bank is the key to successful economies. Continue reading ‘The Future of US Capitalism’

This is the second of two posts on changes I think need to be made for a new, more sustainable economic and social system. Click here to read Part I. The full article exploring these interventions was first published in August 2008 on Goldmau.com.

Since the early part of the last decade, I have uncomfortably witnessed the unstoppable force of mass consumerism and economic leverage take over every aspect of our system in complete disregard for the social aspects. However, it was not until this recent “quantity over quality” takeover engulfed the cultural fabric of our society that I started to really question the future viability of Mass Capitalism. It seems to me what we need in its place is a new, more qualitative capitalism.

In the first post, I explored two of four areas of intervention for restructuring the imbalances of today’s capitalism:  monetary policy and globalization management. In this post, I discuss the latter two: education and regulatory transparency.
Continue reading ‘A New Qualitative Capitalism Part II’

Continue reading ‘A New Qualitative Capitalism Part I’

This is a guest post by Sean D. Jasso, PhD, practitioner faculty of economics.

The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.

~ Peter F. Drucker

The big question on the minds of most people is: What is the future of the economy?

The answer is not always found in the news—today’s journalism is often polarized, biased, or not focused on reporting the story, but rather on enhancing a perspective of the story for the benefit of a targeted audience. For example, for several months economists, journalists, and politicians alike have hesitated on how to characterize the state of the economy.

These so-called experts are afraid of saying the r-word, most often associated with recession, or, correctly defined, a contracting economy. Any astute observer can see that the economy is contracting in certain industries while also growing in many others. This ebb and flow is nothing new and since World War II, to use as a benchmark for the modern economy, every decade has experienced the natural phenomenon of growth and decline.

This article’s central objective is to elaborate on the issue of the apparent economic slowdown while providing insight on how history and theory help minimize the confusion. The answer to the big question is not simply recession, but rather, another r-word—resilience. Continue reading ‘The R-Word and the Future of the Economy’