The Future of Capitalism: Credit, Lending, and Leverage

McKinsey Quarterly (2010). The future of capitalism: Credit, lending, and leverage. Retrieved April 14, 2010 from: https://www.mckinseyquarterly.com/PDFDownload.aspx?ar=2555

This writing is a summary of a panel discussion between several experts that are opining about various subjects regarding the economy and in particular the subjects of credit, lending, and leverage; the summary is published on the McKinsey Quarterly Web site and is a collaborative effort between McKinsey and Duke University’s Fuqua School of Business. The first subject discussed is the current status of the credit market. Alan Schwartz of Guggenheim Partners states that credit availability has returned to the larger corporations but not to the small-business or to the consumer markets yet. This reality has a serious negative impact on the economy because small businesses are the biggest employers in the economy and the consumer is small business’s customer. The next subject of the discussion is global rebalancing, which is referring to the GDP of developed economies as compared to those of emerging economies. It is stated that by 2014, the GDP of emerging economies will surpass that of developed markets and also, that by 2030 to 2035, the U.S. will no longer be the dominate economy in the world, it will likely be China, followed by India. The last main subject discussed was the economic recovery and preventing the next crisis through regulatory changes. Panelist David Rubenstein, of the Carlyle Group, states that there is not enough wisdom in Washington to figure out how prevent future problems partly because the current administration has so little private-sector experience. Seth Gardner of Duke University’s Center for Financial Excellence states that any regulation that will attempt to eliminate asset bubbles would be silly because bubbles cannot be completely eliminated from a capitalistic economy. Measures should be taken to soften the blow of the next bubble burst. Alan Schwartz states that he is hearing the there may be no significant new regulations coming out of Washington. Rubenstein disagrees and states that congress will do something before the November election. This is a very interesting discussion that is very informative as to the things that affect the economy and how the actions of lenders, businesses, and the government can make a big difference in the direction the economy goes now and in the future.