Good Morning!
First of all, I would like to say I am not a Karl Marx enthusiast, neither I hate him or his theories, I just like to be reasonable. And being this way, I should say the Captalism works in cycles, like a person who is maniac depressive: sometimes he or she is extremely optmistic about the future and other times he or she is totally distressed.
The current crisis started one year ago, when the immobiliare market felt the results of such optimism: banks lent money to investiment banks and the last ones bought house papers or their derivatives, selling them again to a lot of investors. Once such papers and derivatives proved to be a bubble, like the internet campanies assets 8 years ago, the chain effect started and arrived at the common banks, which lend to "real" companies, as General Eletric, the Coke Company, etecetera.
Those companies, fearing not having enough money to finantiate their projects need to cancel or postpone them. If this occurs, the construction field will suffer and again causes a chain effect: workers will be fired and those employed will think twice before buying. If more people save their money, will be less money in the market and the companies will not have money to continue their projects.... A vicius circle begins to form.
According to Paul Krugman, the US government should break this circle by spending more, investing more on the market, because inflation is the smaller problem now. Besides Fed is borrowing much money almost paying nothing for them (the treasure bonds are indeed paying nothing for their buyers, discounting inflation).
That's all. Bye and good luck!
