The trend these days is to set up free trade and deregulated capitalism as the cause of our present economic woes. Regulation is important in some contexts, such as in the environmental impact of industrial byproducts, but let me make something clear:

The financial firms are not capitalist.

The premise that makes capitalism work is that something of value is produced and the people who created it are rewarded with capital (i.e., the ability to leverage the value others provide) based on the assessment of that value against that of competing products or services. The best one, in theory, wins.

The financial industry is producing nothing of value. Its primary goal is to acquire more capital by what essentially amounts to arbitrage: purchase an asset when the price is low, sell it when the price increases. The word create does not factor into this at any point; the creation is being done by the companies that they are buying and selling.

Because they have divorced money from its meaning, it is no surprise that it looks all the same to them whether they use their own or someone else’s – so they’ve been using someone else’s and lending to others in turn.

The problem is that when you use someone else’s money, they can come calling at any time… and when you lend someone else yours, you always have to take into account that they may not be able to pay you back. What happened in the financial sector was that everyone had their hands in each other’s pockets and no one had produced any sort of actual value.

So stop calling it capitalism run amok. It isn’t capitalism to begin with.