The brink of capitalism

As Wall street tries to steer its way though this week, one by one of its giants are falling. It all started with Lehman Brothers, one of the oldest institution in wall street crashing on 4 billion dollars worth of debt. Despite talks with Barclay Bank and Korean Development bank, none was able to rescue Lehman which eventually filed for bankruptcy on Monday 16th of September 2008.

The chain of events further weakens AIG the largest insurance company in the world. On the previous week AIG was reported to be seeking 40 billion of loans from the Fed. But suprise suprise it turns out AIG was in the far worst condition than anybody has expected. The Feds eventually rescued AIG for the sum of 85 billion dollars.

Who is next? Morgan stanley shares are plummeting and Goldman Sachs as strong as it is seems shaky. In the UK Lyodds just took over HBOS. Six of the among largest central bank is pumping over 270 billion dollars to the stock market in an effort to prevent market from further crashing

Steping out and looking at a larger picture and one has to wonder, where has all the money gone? We do not see global production of any commodities or manufacturing drop so much in one day as the drop of the market in Wall street.

It is when one understands the core of capatilist that such drops and bankruptcies are possible even when production of everything else is relatively stable

I shall not bore you with the details of how capitalist works. But strip everyting from the regulation and conservertive investments, capitalist works on greed which is the very most intristic nature of humans. The more greed the market the more positive the growth. Prices start of companies and assets becomes inflated , far more that what their initial value is. Unregulated and uncontrolled the positive growth can turn into a bubble. Stock prices become overinflated and like any bubble become to overstessed. Investors are paying a lot of money expecting a good return. However, companies, consumers and production cannot keep up with investor's expectation. Turning sour the investors sell away the holding to minimise lost.

Prices tumbled. In an event when a lot of this happens market declines. Suddenly the very people who works for the company loses their job because when the investors pulled out the company does not have enough money to continue operations.

The customers loose too. Not only that they loose the product that they have been loyal, all the extra money that they have paid for the product ( cost of production ) has been robbed away by the capitalist.

In the end of the day, Its the capitalist who becomes rich. This is even when markets are down. And it seems that this has been a vicious cycle again again.

If you want to be rich and you can't beat them, then join them. Of course there is a different between a smart capitalist and a foolish one. A capitalist looks when the market is in recession and starts investing on good stocks that are cheap. when recession is over, market price will go up along with profits. However, do not be over confident. Take the money out before it drops again.

The ability to spot the right time to buy and sell as well as being able to more or less predict the trend that defines a smart capitalist. An even smarter capitalist would be able to move from one stock to another thereby sustaining profit even when the general outlook of the market is poor.

So there you go. If you do not know a lot about investing start reading the books concerned with it. Do not directly jump start on buying stocks but follow the market first to get a feel on the market. Start small and roll the money. Lastly, don't be a fool and put everything you got on something that you are really not sure about.