If the Elliot Wave theorists are to be believed then we have started wave four up of a five wave bear pattern going down i.e. Wave 1 down, Wave 2 up, Wave 3 down, Wave 4 up, then Wave 5 down.



Certainly, as I write 16th March 2009, the Dow Jones Industrial Average (DJIA) has rallied 11% and so it looks like wave 4 is underway and if it gets through 7240 on the Dow, it might make it to 8600 (and then start its wave 5 down from the 8600-8800 region).

If this comes to pass the wave 5 down could be brutal and may go down for two years (that's what happened when stocks rallied into April in 1930, after the 1929 crash ) : I've seen projected DJIA figures of 4700 down to a pessimistic 2000. Now, when the wave five happens the Commies will come out of the woodwork (they did in the 30's) and the message will be anything from ?Capitalism is Dead? to ?Break up the Union?.

They will point to the all too visible Banking failures and the on going credit crisis as Capitalist failures.

Now, a Capitalist is someone who carefully calculates the risks of their venture, minimises them, and invests responsibly with a good prospect of a profit.

The Banks failed to do that, they had little or no checks into the prospects of the lender actually paying them back. In many cases the money was given to people who should have never have received it: sub prime was an understatement, the people given money were very unlikely to pay it back.

A UK example was when a failed asylum seeker (shouldn't have even been the UK) bought a new luxury apartment overlooking the River Thames: he had virtually no income, no job, no right to be in the country and no assets. The salesman then simply asked if he'd like to buy another apartment in the Block and the failed asylum seeker said ?Yes?.

The result was the failed asylum seeker had two riverside apartments worth over One Million Pounds, the Salesman had his commissions, the Bankers got their Bonuses and to hell with any responsibility and the future.

Some of the Banks acted like reckless, greedy individuals with little or no responsibility: as long as they got their cut (Bonus) they couldn't care less who got the money. My argument is that these people weren't Capitalists they were just Reckless and Greedy: in any political system you care to mention they would have failed, they acted without care and responsibility.

But did the Banks act alone? I don't think they did: I think Governments printed money and then told the Banks to get the money out there, we are stimulating the economy. Notably, the US stopped releasing M3 money supply figures sometime ago (18+ months ago), that's the amount of money that they are printing.

So I don't think Capitalism has failed, but I do think it's flawed. The problem is that if you run Capitalism long enough the few Capitalists end up with virtually all the money and the workers who really built the businesses end up with little financial reward for their efforts. Very often they see the industrial process they helped develop being shipped off to third world countries along with their job.

In short, most of the people who call themselves Capitalists aren't really Capitalists, if they were Capitalists, they would actively help other people become capitalists and mentor them in the process.

In the seventies in the US people were given credit cards which no doubt increased the retail spending, but this giving of liquidity to consumers can only ever be a short term fix (they have to pay the money back one day). The real fix is to get real money in their hands: their money.

Now, there is an American Hero who is a real capitalist, he's helped his workers become capitalist and set up on their own and supply him with parts and services. This American Hero is actually a South American Hero, Ricardo Semler from Brazil, he ran (or may still run) the world's most usual workplace SEMCO.

In this company the workers ran the production, set the targets, and even evaluated their bosses. They even, at one point, decided on the new site for the factory. In other words Semler introduced industrial democracy and the workers were given 23% of the profits: that's real money in their hands: their money. The company grew many fold despite the turbulent Brazilian economy.

Virtually every North American Major corporation, from IBM to lesser Corporations, visited Semco in Sao Paolo, Brazil and were amazed and mystified that such a corporate culture could flourish. I recommend anyone interested in Capitalism to read Ricardo Semler's book ?Maverick?.

So how can the US economy be saved? By implementing Industrial Democracy and giving the workers a percentage of the profits at least 22%. Semco was going under when Ricardo Semler implemented his industrial democracy plan: he had nothing to lose.

Similar profit sharing schemes were implements by dot com start ups in the US and some of them were very successful.

So, by implementing Industrial Democracy, the corporation is likely to flourish (grow many fold) along the way get more efficient (the workers will not tolerate waste when their 22% is on the line) and the workers who really generate the profits are rewarded. The stress levels of the workers goes down (they can change the system): with transparency they know the real financial situation of the company and they'll even find out that the company operations are not as profitable as they thought: that tempers wage demands. When a hard decision has to be made, i.e. lay offs, the workers have to make the decision: cuts the stress the boss has, down considerably.

You're probably, thinking this is crazy it's socialism: no it's not, its real capitalism and when you unleash the real creativity of the workforce the results will be way beyond expectation.

Most companies have a hierarchic structure, with generally a few people at the top do the thinking, and the rest follow orders: that's a feudal system. If you get everybody thinking in the company, then things get much more interesting: inefficiencies can be resolved and the potential cash cows will spring forth.

In other words when most workers clock on their brains clock off: that's a serious waste of resources (the few people at the top doing the thinking). Now if everybody starts thinking, then the brain power the employer paid for starts to kick in, and the employer just may find the employees really know how to run their section and may be able to improve it markedly.

And when the US workers have real money in their hands: their money, then retail spending will take care of itself.

Capitalism has saved America in the past, and in terms of logistics America cannot be beaten: it's the American strength. So if you want to save America, become a Capitalist (and don't be selfish enough to stop at yourself, mentor others to do the same). I'm a Limey and I'm saying that: if you're a Yank you should be singing it from Times Square.