Capitalism's Fundamental Flaw

Abuse of money received from a government that shamelessly loots its people for the "common good" and through manipulation of a highly regulated system is no more an indictment of Capitalism than failure to run is an indictment of a man tied to a chair.

No, those people would just go work for the government.

Naked short selling doesn't require one to have any money to invest nor any shares. You can still make a lot of money and destroy a company's shares if well connected enough. The price falling on the shares is only produced by the apparent glut of shares offered for sale, they don't need to sell initially to produce a price fall, the offer is enough. Once the naked sale has iterated through a couple of loops and many other offers appear as the stock falls then the price plummets, not because of sales but because of lack of sales.

You make money because no one buys. Traders can make money any way the market moves and if sufficiently skilled and backed can make the market move - it _is_ just numbers going up and down.

The way the financial system is currently "architected" (a strange term, but I'll use it) it has as a class an inordinate amount of negotiating power vis-a-vis everyone else (!), and thus is able to capture much of what ought to be consumer and producer surplus.

As much of the value it adds is due to network effects just going to a gold standard (which is a popular cure-all on the internet) wouldn't change much, even if you thought that was a good idea; there's still the same tremendous problem of coordinating trade in the same complex, highly-specialized economy and the central switchboard is still ideally placed to extract most of that value.

The easiest-to-envision solution is to forcibly unbundle the basic storage-and-transmission of credits between accounts (full-reserve checking accounts, basically) and run that infrastructure as a public utility (a handful of mainframes in the fort knox). Let the private sector sell value-added services on top of this, but don't leave the basic infrastructure of value-exchange in the hands of the private sector, who will retain the ability to hold the country up for ransom.

It's an easy solution to envision but it's hard to see much happening; it is too radical a shift to go down easily (and all that surplus value captured funds a lot of lobbying) and it too closely resembles socialism and other bugaboos to be an easy sell to the public at large.

(!) Where we are now is pretty analogous to having the local power company -- which provides necessary services to its area of operation -- also involved in speculative ventures that backfired enough that its continual operation is threatened; having the ability to turn the lights off would naturally give the local power company a lot of leverage negotiating for a bailout.

Suppose that the "too big to fail" banks were allowed to fail, and there was temporarily a severe disruption in the banking system. How would you propose that federal, state, and local law enforcement and other "essential services" get paid? With cash -- dangerous and risky? With checks -- while the banking system isn't reliably working? Would you trust them to work without pay for very long?