What is capitalism? Why do you think it is a good/bad economic and political system? What would you change to make it better?
Capitalism defines an economic or political system where private owners control industries and businesses or where individuals own capital goods. The term is an economic/political system where factors of production that is, labour, land, capital and entrepreneurship are governed or owned by private entities. The private individuals exercise power over the factors by owning companies. In a capitalist political system, the state has no control over a country’s trade and industry where such private companies that govern the industry do so for profit motives. Capitalism also refers to a system where people and companies own most property and make most decision whereas the government plays a secondary role.
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I think that capitalism is good political and economic system. First, capitalism permits efficient allocation of resources. In a capitalist system, there exists an invisible hand that allows resources distribution according to consumer’s preferences. The political/economic system paves way for efficient production thus enabling firms work with incentives that make the organizations productively efficient. Capitalism is indeed a better idea since it allows economic and political freedom. Through a capitalist society and economy, discrimination is eliminated and people are brought together. Trade is thus encouraged between nations and people from diverse backgrounds. A capitalist political and economic system allows economic growth and expansion. Living standards improve as a result of an increase in gross national product.
To make a capitalism economic/political system better, I would narrow down any inequality and social division brought about by passing of wealth. I would create a system where assets are almost equally owned by all citizens. There would thus be minimal or no likelihood of concentration of wealth among few groups of people hence expunging inequality through uniform wealth distribution.
What happened in 2008? Why did the market crash? What would we have to avoid In the future to prevent another market crash?
Big short film directed by Adam McKay depicts how the 2008 financial crisis was precipitated and sparked by the housing bubble in the United States. The crisis is portrayed by film stars such as Brad pit, Christian Bale, Melissa Leo, John Magaro, Marisa Tomei among others. According to the film, the 2008 financial crisis was catalysed by an extremely unstable housing market in the United States founded on high risk subprime loans. The Big Shot film explains that mortgage brokers profited by selling housing deals to Wallstreet banks. The loaned financial institutions would later pay higher margins for the risker loans thus creating the bubble. The film’s plot depicts a situation where the loans are defaulted leading to a rise in CDO prices.
In the film, a credit default swap is created to allow Burry the Scion Capital manager to short the housing market. The placing or a moratorium on withdrawals further worsens the situation that culminated to the 2008 market crisis. The movie explains that one of the causative factors behind the 2008 market crisis was the poor structured loan packages dubbed collateralized obligations which exacerbated the mortgage crisis. In the film, Baum attributes 2008 crisis to have been caused by the housing bubble consequently affecting the country’s financial sector. The misleading rankings coupled with mortgage backed securities fuelled the housing market collapse and consequently the 2008 crisis. The film sends home a message that failing to pay back mortgage loans due to lending of money to non-financially sound people caused sinking of the financial sector in 2008. The failure by the rating agencies to be objective and ethical by assigning false credit ratings precipitated an environment that fuelled the 2008 market crisis. The Big Short Movie attributes the occurrence of 2008 market crisis to the fraud by the Wall Street firms for example Lehman Brothers and Bear Stearns. According to the film, the greed of the real estate industry and the mortgage bankers who were quick to offer loans which were later defaulted led to the 2008 market crisis.
What is a shell company? What is the difference between tax avoidance and tax evasion? What is a fiscal paradise? What are the most famous fiscal paradises in the US and abroad? Why would you use a fiscal paradise or why would you suggest that someone has an account/company there?
In reference to the Laundromat film, shell companies describe a corporation that has no real workers or office but exists only on paper. The film depicts a shell company as an inactive firm used to perpetrate financial improprieties or maybe be maintained dormant for use in the future in other capacities. The Laundromat film makes a deduction that shell companies have no assets nor any significant business undertaking. Such firms are incorporated to undertake illicit purposes such fraud, tax evasion, tax avoidance, money laundering or may be formed to carry out legitimate motives such as storing funds. The film presents Ellen Martin and her husband as victims of Mossack’s shell companies.
Tax evasion is the deliberate illegal non-payment of taxes by corporations, individuals and trusts, characterised by misrepresentation of a true state of affairs with an intent of cutting the business’s tax liability. Dishonest tax reporting is an illustration of tax evasion. Conversely, tax avoidance as the film infers is the arrangement of a businesses’ financial affairs to one’s own advantage with a motive of trimming payable tax by means provided by the law. Fiscal paradise describes foreign tax havens mostly located abroad which offers businesses and individuals from other nations little or no tax liability. The most famous fiscal paradises in the US include Montana, Delaware and Nevada. Examples of abroad fiscal paradises include the Cayman Islands, Luxembourg, Singapore and Bermuda. I would use a fiscal paradise or recommend having a company in such regions due to the benefits accrued from operating in a fiscal paradise that include maximum privacy, security, convenience and protection from tax liability thus enabling company expansion without limitations brought about by tax remissions.
