Is American capitalism becoming a thing of the past? No, not hardly. Evidence to the contrary can be found in the strangest places - - even within the presidential campaign of Senator Barack Obama.

First the bad news. In the past two weeks, American stocks have lost approximately 25% of their value. In dollar terms, we‘re talking about a loss of roughly $3.16 trillion, which is more than four times the controversial $700 billion “rescue” plan that the United States Congress hesitantly approved a few days ago.

Additionally, none of the moves made by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson have produced their desired outcomes, at least not yet. The money markets remain “frozen,” and the free-flow of credit has not yet resumed.

But consider carefully how they have responded to the crisis. The new policies from both the Federal Reserve and the U.S. Treasury have been structured so as to actually support the prices of financial assets. This contrasts with the stock market drop (I’ll refrain from calling it a “crash” since there seems to be some controversy over the technical definition of that term) of October 1987, when, President Reagan’s tax cuts not withstanding, U.S governmental policy was in many ways working against the stock market.

And notice the global response to the crisis. Finance ministers and heads of central banks were quick to pursue a coordinated response with the U.S., and Chairman Bernanke led the way. The outcome was an international round of interest-rate cuts (not interest rate increases), which included the major central banks of Europe, and with the exception of Japan, the central banks of Asia, including those in China.

Now, the crisis is not over, the long-term impact to our economy is not yet knowable, and it’s easy to kick Bernanke, Paulson, and Bush while the chips are down. But don’t miss the big picture.

In previous crises, the instincts of policy makers have most often been to tighten monetary policy, and to implement more governmental control over economic resources. Today, policy makers around the world instinctively want to loosen monetary policy, and to encourage more economic resources to flow into the coffers of private individuals and institutions. Now, more than in previous eras, it is understood that the real hope for economic productivity is found in the private sector, and not in the halls of governments. Continued...