The World Financial Crisis

Submitted by DrConway on November 16, 2008 - 2:33am.

I found that link.

NYTimes Article

Have a gander at it. It suggests that there will be a return to more regulation. :)

Submitted by thorin_bane on November 16, 2008 - 4:15am.

not accourding to harper, at least that is what my paper says.

Submitted by Fidel on November 16, 2008 - 8:10am.

Ghosts of 1933 summit haunt Washington talks

G20 urged to avoid errors that deepened Depression

Quote:

LONDON–Melting markets, crashing currencies, busted banks, soaring unemployment. And a world that holds its breath, pregnant with hope for the eloquent new American president, yet gripped with dread that the "Devil's Decade" might get them anyway.

A synopsis of the mood this morning, as Prime Minister Stephen Harper and his G20 counterparts huddle with a lame-duck George W. Bush in search of a collective path back to global prosperity?

No, actually. We speak of another summit from the grimmer days of June 1933, when a brace of 66 national delegations gathered in London for an unprecedented global summit meant to cure capitalism itself – and managed, over the course of 15 disastrous days, to achieve absolutely nothing. . .

Submitted by M. Spector on November 16, 2008 - 9:36am.

Slavoj Žižek wrote:

The financial meltdown has made it impossible to ignore the blatant irrationality of global capitalism. In the fight against Aids, hunger, lack of water or global warming, we may recognise the urgency of the problem, but there is always time to reflect, to postpone decisions. The main conclusion of the meeting of world leaders in Bali to talk about climate change, hailed as a success, was that they would meet again in two years to continue the talks. But with the financial meltdown, the urgency was unconditional; a sum beyond imagination was immediately found. Saving endangered species, saving the planet from global warming, finding a cure for Aids, saving the starving children . . . All that can wait a bit, but ‘Save the banks!’ is an unconditional imperative which demands and gets immediate action. The panic was absolute. A transnational and non-partisan unity was immediately established, all grudges among world leaders momentarily forgotten in order to avert the catastrophe. (Incidentally, what the much-praised ‘bi-partisanship’ effectively means is that democratic procedures were de facto suspended.) The sublimely enormous sum of money was spent not for some clear ‘real’ task, but in order to ‘restore confidence’ in the markets – i.e. for reasons of belief. Do we need any more proof that Capital is the Real of our lives, the Real whose demands are more absolute than even the most pressing demands of our social and natural reality?

Compare the $700 billion spent on stabilising the banking system by the US alone to the $22 billion pledged by richer nations to help poorer nations cope with the food crisis, of which only $2.2 billion has been made available. The blame for the food crisis cannot be put on the usual suspects of corruption, inefficiency or state interventionism. Even Bill Clinton has acknowledged that ‘we all blew it, including me,’ by treating food crops as commodities instead of a vital right of the world's poor. Clinton was very clear in blaming not individual states or governments, but the long-term Western policy imposed by the US and European Union and enacted by the World Bank, the IMF and other international institutions. African and Asian countries were pressured into dropping government subsidies for farmers, opening up the way for the best land to be used for more lucrative export crops. The result of such ‘structural adjustments’ was the integration of local agriculture into the global economy: crops were exported, farmers were thrown off their land and pushed into sweat-shops, and poorer countries had to rely more and more on imported food. In this way, they are kept in postcolonial dependence, vulnerable to market fluctuations – soaring grain prices (caused in part by the use of crops for biofuels) have meant starvation in countries from Haiti to Ethiopia.

Clinton is right to say that ‘food is not a commodity like others. We should go back to a policy of maximum food self-sufficiency. It is crazy for us to think we can develop countries around the world without increasing their ability to feed themselves.’ There are at least two things to add here. First, developed Western countries have taken great care to maintain their own food self-sufficiency through financial support for their farmers (farm subsidies account for almost half of the entire EU budget). Second, the list of things which are not ‘commodities like others’ is much longer: apart from food (and defence, as all patriots are aware), there are water, energy, the environment, culture, education, health – who will make decisions about these, if they cannot be left to the market? It is here that the question of Communism has to be raised again. - LRB [7]

Submitted by Fidel on November 16, 2008 - 12:25pm.

The Great Depression of the 21st Century: Collapse of the Real Economy Obama Endorses Financial Deregulation

Obama is a Neo Herbert Hoover - US economy doomed

Submitted by Tommy_Paine on November 16, 2008 - 12:36pm.

Your favorite reductionist here!

I read this thread, and went to the kitchen window to think for a bit. I wonder if economic depressions have more to do with the death of Empiricism than anything else. That the economics are a symptom, not the sickness.

It just strikes me that leading up to WWI, there was a huge interest in the world of the supernatural, and quackery in the medical field was enjoying a hey day that is rivaled only by today's.

As seeming contradiction though, is that this period was also a great time for new science and technology. Electicity and flight come to mind.

Maybe this credulity is a by product of society changing technology? On the edges of these discoveries lie a grey area the public doesn't understand-- whether it's electicity that may leak out into their living rooms through the outlets, or that ghosts or the afterlife can be explained with string theory. These grey areas not yet fully lighted by knowledge are furtile ground for the imagination.

The post WWI era-- the roaring 20's-- seemed a time, like the last thirty or so years in western society, where anything you like can be "true". WWI gave us no shortage of increadible advances in technology-- all geared to killing on a scale never seen before. And, people turned their backs on technology and science as a result. Unfortunately, they threw empiricism out with the bath water.

In a climate where anything can be true, we can see things like tulip bulbs being sold for king's ransom, or shares in South Sea ventures being sold and traded for thousands of pounds with no real prospectus, or any real company behind the paper.

Clearly, since the 1970's or 80's we have seen from academia a resurgence in the idea that empiricism is an outdated thing, a mere narrative made up by old white men from the european enlightenment.

Maybe it is a symptom of affluence? Clearly, only in the lap of luxury can we afford not to be empiricists. Only then can we afford the illusion that basing a mortgage on speculated future prices is sound fiscal policy, or that concentrating wealth in the hands of a few will have "trickledown" effects.

It is, in the final analysis, a system of magical thinking that bleeds into the financial markets that causes all of this.

Submitted by Catchfire on November 16, 2008 - 3:50pm.

I think that's a wonderful analogy, Tommy. This line from Žižek is a great one, an observation that sums up my thoughts on the market with great precision and erudition:

Quote:

The sublimely enormous sum of money was spent not for some clear ‘real’ task, but in order to ‘restore confidence’ in the markets – i.e. for reasons of belief. Do we need any more proof that Capital is the Real of our lives, the Real whose demands are more absolute than even the most pressing demands of our social and natural reality?

Why do we take the absurd dictum of 'restoring confidence' as given? Who has lost confidence? Us? The bankers? What do they believe in instead?

Of course, the fact that Žižek is writing from a deep psychoanalytical position (actually, it's worse than that: he's a student of Jacques Lacan!) somewhat undermines your 'magical thinking' critique. But there was great interest in the occult at the turn of the century, as you point out. I think that the problem comes when you erroneously align technology with empiricism. Technology makes things more complicated, but not necessarily better. In fact, technology, as it exists in the capitalist system, is concerned not with science, but with what Jean Baudrillard (although you'd likely call him a magical thinker) called 'automatism'. He uses the example of moving from the crank starter for an automobile to an electric ignition: more complicated, more chance of malfunction, with no real improvement on the actual functionality of the automobile. But it does fit in with liberal, middle-class virtues and ideology. Likewise the lightbulb: why is it needed during daylight hours at all? But it is sold as white, bright and clean, and we buy it. Technology is inbred with capitalism: with hyperconsumerism, and exchange value subbing in for use.

I'm a bit rushed right now, as you can probably tell, but I'd like to get back to this. Your comparison is nonetheless intriguing.

Submitted by Fidel on November 16, 2008 - 6:35pm.

Glory be to filthy lucre, the bomb, and the Holy fallout which backeth the bloody dollar. Yes capitalists everywhere will be losing faith in the dollar

Submitted by DrConway on November 20, 2008 - 3:55pm.

TPaine makes a good point. The notion that humans can defy reality and simply wish something into existence got exploded quite handily in the 1930s and 1940s, and took another generation to really reassert itself. There's a reason why we praise the 'work ethic' of the 1950s and 1960s, and it's because people knew, back then, that wishing on a stock market didn't magically make a retirement happen; it took faith in each other and in the ability of governments to help retirement happen.

Destroying this faith is one of the ways in which neoconservatives have helped permanently damage the bonds that hold us together, because almost no young person believes anymore that their government will help them live comfortably in retirement.

On the subject of the financial crises generally shaking our planet, take note:

Europe’s grand plans for new Bretton Woods on hold

We do need a new Bretton Woods, all right, but it should be a new one with the old stuff. Retro is in, folks, and it's high time we reinstated fixed exchange rates and capital controls.

Submitted by M. Spector on November 20, 2008 - 4:16pm.

DrConway wrote:

On the subject of the financial crises generally shaking our planet, take note:

Europe’s grand plans for new Bretton Woods on hold

We do need a new Bretton Woods, all right, but it should be a new one with the old stuff. Retro is in, folks, and it's high time we reinstated fixed exchange rates and capital controls.

From an article I quoted in the previous thread [14]:

Quote:

It's all well and good to demand a new Bretton Woods but it ignores the fact that the utterly unique historical conditions allowing for the successful Bretton Woods conference of 1944 no longer exist nor are they reproducible. There was little in the way of negotiations between equals or even serious two way discussion at the 1944 Bretton Woods conference. A completely dominant and victorious U.S. capitalism dictated, and the rest of the capitalist world acceded. The usual laws of capitalist international competition were uniquely and temporarily in suspension.

That is certainly not the case in the world today. The European nations calling for a world conference can't even come up with a cooperative, coordinated response to the crisis among themselves….

Submitted by DrConway on November 20, 2008 - 10:01pm.

The USA actually fought against comprehensive exchange controls in the postwar era, while Europe wanted them. It ended up being that the Europeans initiated exchange controls among each other, but this was conceded to be a poor substitute for getting the US to agree to controls "at both ends" as well.

Submitted by Fidel on November 21, 2008 - 12:08am.

So I guess this is the part of the 1929 do over where North American economies go for a big slide while banksters and financiers take the bailout money and invest liberally in some fascist Euro-Asian country re-arming for war. And here, they'll just seize ownership of everything that's worth anything. Kind of like a change of landlords or something while world war drums beat louder every year. We can see it all now. It'll be some third rate blue blood assassinated in a second rate European city to get things rolling.

Submitted by Doug on November 21, 2008 - 12:08am.

So much for the free market:

Thou shalt not foreclose!

Until it ends up Obama's lap, of course.

Fannie Mae [18] and Freddie Mac [19], the mortgage-finance companies seized by the U.S. government, will suspend foreclosures [20] and evictions over the holidays.

The six-week halt will begin Nov. 26, a day before the U.S. Thanksgiving holiday, and last through Jan. 9, the companies said in separate statements today. The hiatus is designed to give servicers more time to implement a streamlined loan modification program for struggling borrowers.

“It’s a giant time out,” Paul Miller [21], an analyst at FBR Capital Markets in Arlington, Virginia, said today in a Bloomberg Television interview. “I wouldn’t be surprised to see this across the board.”

Submitted by Fidel on November 21, 2008 - 7:55pm.

Khrushchev was right. Gangsters have taken over the DisneyWorld economy. Again.

This Is Not A Normal Recession: Moving on to Plan B

Quote:

November 20, 2008 "Information Clearinghouse [23]" -- - "The Winter of 2008-2009 will prove to be the winter of global economic discontent that marks the rejection of the flawed ideology that unregulated global financial markets promote financial innovation, market efficiency, unhampered growth and endless prosperity while mitigating risk by spreading it system wide." Economists Paul Davidson and Henry C.K. Liu "Open Letter to World Leaders attending the November 15 White House Summit on Financial Markets and the World Economy"

The global economy is being sucked into a black hole and most Americans have no idea why. The whole problem can be narrowed down to two words; "structured finance". . .

It's the end of an era. Here's how economist Henry C. K. Liu sums it up in his "Open Letter to World Leaders attending the November 15 White House Summit on Financial Markets and the World Economy":

"Neoliberal economists in the last three decades have denied the possibility of a replay of the worldwide destructiveness of the Great Depression that followed the collapse of the speculative bubble created by unfettered US financial markets of the 'Roaring Twenties'. They fooled themselves into thinking that false prosperity built on debt could be sustainable with monetary indulgence. Now history is repeating itself, this time with a new, more lethal virus that has infested deregulated global financial markets with 'innovative' debt securitization, structured finance and maverick banking operations flooded with excess liquidity released by accommodative central banks. A massive structure of phantom wealth was built on the quicksand of debt manipulation. This debt bubble finally imploded in July 2007 and is now threatening to bring down the entire global financial system to cause an economic meltdown unless enlightened political leadership adopts coordinated corrective measures on a global scale."

Submitted by jbgatkinkos on November 21, 2008 - 8:45pm.

DrConway wrote:

You wouldn't call Bretton Woods comprehensive enough?

Submitted by remind on November 21, 2008 - 11:42pm.

And JB leaves no "stone" unturned.

___________________________________________________________ "watching the tide roll away"

Submitted by DrConway on November 22, 2008 - 12:35am.

The lack of willingness of the USA to introduce the kind of exchange controls the Europeans wanted, at the time, was not fatal. But it opened a flaw in Bretton Woods which threatened the fixed exchange rates of the era, since deregulated capital flows are incompatible with fixed exchange rates.

Submitted by M. Spector on November 23, 2008 - 1:51am.

Quote:

In the 1920s, Henry Ford perceived a fundamental flaw in capitalism and when he suddenly started paying his auto workers the then extremely generous sum of $5 per day. A unilateral raise of this magnitude was shocking at that time. Ford did this so that his employees would have enough money to buy his Fords. Ford had recognized a fundamental fatal defect of capitalism:

Capitalist Employers throughout the capitalist market can not pay their employees enough so that employees are able to purchase all of the products that capitalism can produce and still make a profit. Without profit there can be no capitalism.

Think about this. If we have an economic system, capitalism, where almost all humans are employees, who, if not employees, will purchase capitalism's products? Hunters and gatherers? Self employed farmers? What group in society has cash to purchase what capitalism produces? Are there enough money lenders and capitalist employers with enough profit and earned interest to purchase all of the production? Experience now clearly demonstrates that there are not. These sources have far more money than they have needs so their wealth simply is held in multiple dwellings, jet airplanes and other luxuries, investments, loans, and cash. This is not a left-right problem, nor a conservative-liberal ideological problem. It is simply a fact. It is an inevitable, unavoidable result of the core dynamic of capitalism. That core dynamic is:

A person with money hires a person with little or no money for the lowest possible wage to earn as much profit as possible for the person who already has money.

It is this profit generating dynamic over decades of time and repeated by hundreds of employers that has created the immense disparity of wealth and power between the top 1% of our nation and the 95% of us at the bottom. This top 1% has as much wealth and income as the bottom 95% of us. The purchasing power of the bottom 95% of us would be vastly enhanced if the wealth of the top 1% was spread more equitably among us all. The fatal defect of capitalism would be bridged. We employees could then purchase all of the products that our labor produced. The fact of the almost unimaginable wealth of the top 1% is little known and is largely suppressed by the capitalist media. The capitalist media ridicules as "class warfare" any thoughts we may have about the injustice and pain we experience because of this disparity of wealth.

So we have many millions of persons on the planet who have legitimate needs, and these same persons are willing and anxious to work. Why cannot our work meet our needs? There are insufficient jobs because employers cannot hire all of us and still make a profit. Capitalism gives us only one way to meet our needs. We must go to work for somebody who can make a profit on our labor. This fundamental flaw of capitalism perceived by Henry Ford is now causing our capitalism to implode, to destroy itself. Henry Ford was unique among the planet's employers in perceiving this flaw and acting to correct it within his own company….

Capitalism can thus produce far more than can be sold at a profit. Capitalists curtail production to avoid loss of profit. If there is no profit to be made, there can be no capitalism. There remain millions of people with legitimate needs who are anxious to work, but there is no work, because there is no profit to be made. For example, the world wide auto industry has the capacity to produce far more cars than can be sold at a profit. This defect of capitalism existed long before the current mortgage bubble and crisis. Auto plants around the world were operating at less than full capacity because there was not a demand by buyers for all of the cars that could be produced. We have some human needs, for example health care that simply cannot be adequately met by capitalists and still make a profit. If there is no profit to be made, capitalists will simply not provide health care.

This fundamental defect of capitalism that has caused it to implode is a truth that is totally suppressed in our capitalist culture. We do not learn of this truth in Econ 1 or even in Econ 101. We do not learn of this truth from our capitalist media.

Given this truth, and the culture wide failure to diagnose the problem we must look at the false solution that capitalists select for us.

Secretary Paulson, Fed Chairman Bernanke and our elected Democratic leaders identify the problem as a "credit crisis," or a "liquidity crisis," and they propose that we employees tax ourselves so as to pay billions of dollars to the bankrupt Wall Street investment banks in the hope that they will again extend credit to employers and liberal credit cards to consumers. They seek to supply the credit to enable capitalists to seek profit making opportunities…. The proposed solution does nothing to provide jobs and wages, and nothing therefore to create demand for capitalism's products….

Wall Street and our Democratic elected officials are vainly trying to rejuvenate a dead system. Lending or giving the dead system more money simply does not solve the fatal defect. The fatal defect is neither diagnosed nor dealt with. The truth is hidden behind a culture wide taboo so that it cannot be discussed in the main stream.

- Doug Page

Submitted by M. Spector on November 24, 2008 - 11:53am.

Quote:

Obama hasn't even been sworn in yet, and already the Wall Street cheerleaders are celebrating his first great triumph. According the pundits, the stock market staged a surprise 494 point rally on Friday because--get this--it was announced that Timothy Geithner would be appointed Obama's Treasury Secretary.

What nonsense. The sudden turn-around in stocks had a lot more to do with short-covering than anything else, but don't let that get in the way of a good story. Even so, the last minute surge on the NYSE couldn't stop another week-long bloodbath that ended with the Dow and S&P 500 tumbling another 5 percent. That's not to say that Geithner is not bright and talented guy. He is; and so is his White House counterpart, Lawrence Summers. But the media hype is way overdone. Geithner doesn't drive the markets and he isn't "change you can believe in". In fact, he's a protege of Henry Kissinger, a member of the Council on Foreign Relations, and has the same political pedigree as his predecessor, Henry Paulson. They're both part of the ruling fraternity and their views of the world are nearly identical. There's no doubt that Geithner will be more competent and effective than Paulson but, then again, who wouldn't be? Paulson may be the biggest flop at Treasury since Andrew Mellon steered the country onto the reef during the Great Depression. The recent flap over the Troubled Assets Relief Program (TARP) just proves the point. After convincing Congress to pass a $700 billion bailout plan--by invoking the specter of economic Armageddon and martial law--the former G-Sax chairman proceeded to set up a program for buying back mortgage-backed securities (MBS) and other junk paper from his banking buddies. Paulson argued that removing the crappy loans would help the banks get back on their feet and start lending again. Of course, no one could really figure out how the process was going to be executed, but maybe that's just nit-picking. Fortunately, Paulson never got a chance carry out his plan. He was torpedoed by the stock market which plunged seven days in a row losing nearly 20 percent of its value until Paulson threw in the towel and did what 200 economists had suggested from the very beginning---buy preferred shares in the banks so they could rev-up their credit engines again.

Will Geithner be that stubborn? Not likely. And Paulson is a hard-nosed class warrior, too. Notice how every dime of the bailout has gone to banksters while all the efforts to provide relief to autoworkers, consumers or struggling homeowners have been blocked. Anyone who isn't in the upper 1 percent income bracket can forget about getting a helping hand.

- Mike Whitney

Submitted by Fidel on November 24, 2008 - 4:42pm.

Thanks, M. Mike Whitney is yet another writer worth more than the mainstream wire and news print newsies.

Colossal Financial Collapse: The Truth behind the Citigroup Bank "Nationalization"

>by F. William Engdahl

Quote:

On Friday November 21, the world came within a hair’s breadth of the most colossal financial collapse in history according to bankers on the inside of events with whom we have contact. The trigger was the bank which only two years ago was America’s largest, Citigroup. The size of the US Government de facto nationalization of the $2 trillion banking institution is an indication of shocks yet to come in other major US and perhaps European banks thought to be ‘too big to fail.’

The clumsy way in which US Treasury Secretary Henry Paulson, himself not a banker but a Wall Street ‘investment banker’, whose experience has been in the quite different world of buying and selling stocks or bonds or underwriting and selling same, has handled the unfolding crisis has been worse than incompetent. It has made a grave situation into a globally alarming one. . . (see The real truth behind Citigroup bailout)

Submitted by Doug on November 26, 2008 - 6:27am.

Fall of the Celtic Tiger

How did the model economy - the low-tax miracle lauded by economists, neo-conservatives and liberals alike - go from Celtic Tiger to Celtic Catastrophe?

The property market is in genuine crisis throughout Ireland. Yesterday, the Organization for Economic Co-operation and Development, in its Outlook report, predicted the downturn will hit Ireland particularly hard. "Activity is contracting as the severe housing market correction has weakened the wider economy, and the weakness will persist well into 2009," it said.

Everyone - economists, estate agents, bankers, employers - thinks values still have a long way to fall and will make the recession worse. No sector, with the possible exception of the discount grocers, has survived unscathed. The banks are in particularly bad shape.

But Ireland cannot blame outsiders for the entire mess. "This is a home-made crisis made worse by the international crisis," said Constantin Gurdgiev, the research director in Dublin at NCB Stockbrokers and an economist at Trinity College. "This is the most indebted country in the whole European Union."

Submitted by Doug on November 27, 2008 - 11:41am.

The horror! The rich have had to cut back on adultery!

The most surprising stats in the study relate to gender and what might be termed “length of service.” Fully 82% of men in the study said they planned to lower the allowances to their mistresses, while more than three quarters planned to provide fewer gifts, less expensive gifts and fewer perks, like jet rides, resort vacations and top restaurant meals.

Women were far more generous to their paramours in the face of financial crises. Less than 20% planned to lower allowances, gifts and perks, while more than half planned to raise them.

And, for that matter, their spouses [32]:

'You loser!" screamed Katie, aiming a vase at her husband. "You've destroyed my life,'' she continued, hurling it. "Just look at my hair, look at my nails! You loser, you jerk, you nobody."

Katie's husband, Jack, whose property portfolio disintegrated in the financial crash, had just told his wife that she would have to cut back on her thrice-weekly visits to Nicky Clarke, the nail salon in Harvey Nichols, and the oxygen facials, chemical peels and seaweed wraps at Space NK.

Submitted by Fidel on November 27, 2008 - 9:48pm.

Causes and solutions to the global financial crisis

>by Henri M Sader

Quote:

The role of financial deregulation

In Canada, the New Democratic Party (NDP) has long been concerned with financial deregulation and other policies that created the structural problems within the financial system. The NDP warned in 1998 that "Canadians should be particularly concerned about the explosive growth in derivative products and off-balance sheet liabilities." New Democrats warned that accelerating deregulation would only serve to put the financial system at risk by allowing banks and other financial institutions to engage in and leverage financial activities that carry a credit risk that is not based on real economic activity.

As predicted, the gap between growth in the real economy and the financial sector has increased dramatically since the 1980s and 1990s. Canadian Economist Jim Stanford was one of the first to warn about this problem in his book Paper Boom, published in 1999. Pillars that once separated insurance, investment and commerce, built to prevent the spread of risk from one category of financial institution to another in another 1929-style crash, were collapsed during the great wave of deregulation of the 1990s. The deregulation wave also encouraged speculation over well measured and productive investment, as Stanford pointed out.

It was only a matter of time before human nature followed its course. Greed, amplified by the system, overpowered unregulated markets. Root causes of the problem lie in the unsustainable nature of credit to the growing masses of working poor and an increasingly impoverished middle class.

China has devised a stimulus package. Harper, otoh, is trying to pull the wool over our eyes.

Submitted by M. Spector on November 27, 2008 - 10:06pm.

Sader's "solutions", alas, amount to nothing more than what he calls a "Keynesian resurrection" - reforms designed to make capitalism work better. They don't even begin to address the inherent contradictions of capitalism that have led to the crisis, or point towards replacing capitalism with a better system.

Submitted by Fidel on November 27, 2008 - 10:46pm.

M. Spector wrote:

Well I think what he does suggest is a tall order in and of itself: accountability - re-regulation - eliminate poverty - and breaking with the USA's ideologically driven financial establishment. All of those ideas would be noble goals whether by bloody revolution or otherwise. It didnt go all Keynes' way during or after Bretton Woods.

If by Keynesian resurrection we mean a return to mixed market economics, and add market socialist theory to account for social and environmental costs this time, then things might turn out differently. But I think the world is beginning to realize, finally, that straight up capitalism does not work. It's a recipe for disaster.

Submitted by M. Spector on November 30, 2008 - 11:36am.

From an article that actually predates the present acute crisis, but nonetheless presents an accurate perspective:

Quote:

Canada’s working class is on the ropes. Its major institutions — the trade unions — are reeling from successive defeats. The number of union members in Canada is in serious decline, from 35 per cent in the 1980s to 28 per cent today. The Canadian Auto Workers — Canada’s largest, most successful and most militant union — is in a state of collapse as cuts in the auto industry force it to its knees. The CAW, which denounced concession bargaining and proclaimed it would never, ever go down that road, has now fully embraced concession bargaining and two-tier contracts in the name of the “investment competitiveness” of its bosses.

These are dark days for the trade union movement, days of defeat, concessions, and cap-in-hand pleas to the bosses. If the trade union movement continues down this road, it will only get worse — the concessions demanded by capitalism will never end until the working class is powerless and on its knees.

The political clout of the working class in Canada is at its lowest ebb since prior to the Great Depression. The NDP has bought into neo-liberal ideological hegemony, and has essentially become just another capitalist political party. Unorganized workers feel less and less sympathy for trade unions desperately trying to salvage their entitlements while leaving the unorganized to their fate. Public sympathy for unions is very low since unions appear only concerned about the narrow economic interests of their existing members.

What should the working class and its last remaining institution — the trade unions — do at this juncture?

Perhaps the trade unions should learn from history. What did trade unions do during the Great Depression, the last time capitalists tried to use an economic crisis to crush the modest gains the working class had made? The only power of the working class is its own self-organization. And that is what the trade unions and socialist activists did in the 1930s — they commenced a massive organizing drive of the unorganized; they fought strikes over demanded concessions; they occupied closed factories in solidarity with laid-off workers; they organized the unemployed and the poor; and they produced that great slogan of solidarity — “an injury to one is an injury to all,” and actually acted on it.

Today unions are not doing much of this. They say they want to do it, they pass resolutions and make speeches about doing it, but they are not acting. As they accept concessions involving two tiers, they are fracturing their own internal solidarity. As they ignore the plight — except for pious, self-congratulatory resolutions passed at conventions — of the unorganized and the poor, they fracture the solidarity of the class as a whole.

The only way the working class ever obtained any effective power was through mass self-organization.

That was true in 1850, and it is even more true in 2008.

John Conway

Submitted by 500_Apples on November 30, 2008 - 7:01pm.

Spector and Fidel, thank you for all the links.

Submitted by M. Spector on November 30, 2008 - 11:52pm.

You're welcome.

But it's a shame nobody is taking Conway's words to heart about the need for the working class to self-organize on a massive scale. Instead they cheer on the traitorous trade union leaders who want the working class to abandon the struggle, and put their faith in a Liberal Party-led government to get them through this Second Great Depression.

Submitted by 500_Apples on December 1, 2008 - 1:34am.

M. Spector wrote:

You're welcome.

That's not fair.
Where do you want the working class to turn to?
Are you saying trade unions have been coopted?

Everything that attracts a lot of working class support gets coopted by the powers that be. The best example I can think of right now are the Democratic party, and a better example being the Obama campaign.

"the need for the working class to self-organize on a massive scale" sounds like a hard job. The path forward is not remotely clear.

Submitted by Fidel on December 1, 2008 - 1:49am.

HALIFAX INITIATIVE(pdf)

Citizens announce 6 point plan to deal with global financial turnoil For immediate release - September 30, 1998

Lorne Nystrom and several others, including Henri Sader and Jim Stanford, published a softcover book at turn of the decade or so enitled "Just making change: The 100 percent, honest to goodness truth about our user unfriendly financial system and how to escape it" [41] True North Press. I ended up buying a copy from a used book dealer in Chelsea, PQ. There may be copies in public libraries. I never checked though. There are chapters by everyone from labour economists, to one former Liberal senator on how to save money on ATM and bank charges, to a couple of chapters talking about the need for global fanancial disarmament as per Keynes' recommendations for cooling down "hot money" speculation. It's a very informative little book. We don't vote for global money speculators or bond salesmen, so why should they have so much influence over sovereign decision making?

Submitted by M. Spector on December 1, 2008 - 1:47am.

500_Apples wrote:

Where do you want the working class to turn to?

Turn to?

Did you read Conway's article? The working class has to rely on its own power, rather than putting its trust in capitalist politicians to protect them from economic ruin. They don't have to "turn to" anywhere or anyone other than themselves.

Quote:

Are you saying trade unions have been coopted?

Well, duh! Again, read Conway.

When their leaders are supporting capitalist governments as a way to protect their rights and their jobs - yeah, I'd venture a guess that the trade unions have been "co-opted".

Quote:

"the need for the working class to self-organize on a massive scale" sounds like a hard job.

It is a hard job. That's why it's so much easier for their leaders to look for phony accommodations with capitalist political parties and turn the workers into spectators rather than activists for change.

As Conway says, "The only way the working class ever obtained any effective power was through mass self-organization. That was true in 1850, and it is even more true in 2008."

Submitted by Doug on December 2, 2008 - 9:05am.

This is very much not good news for the US economy:

The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

"In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent."

In short, a lot of people can wave bye-bye to their credit cards - and corporations can wave bye-bye to the sales that would be made with them.

Submitted by Fidel on December 3, 2008 - 3:39am.

Thanks Doug. It doesnt sound good.

Breakdown of the Global Monetary System by summer 2009

Quote:

The G20-meeting held in Washington on November 14/15, 2008, is in its essence a historical indicator that the Western - above all Anglo-Saxon - monopoly on global economic and financial governance, is coming to an end. Nevertheless, according to LEAP/E2020, this meeting also clearly demonstrated that this kind of summits is doomed to inefficiency because they concentrate on curing the symptoms (banks’ and hedge funds’ financial difficulties, derivative markets’ explosion, financial and currency markets’ dramatic volatility, ...) rather than the fundamental root of the current crisis, i.e. the collapse of the Bretton Woods system based on the US Dollar as sole pillar of the global monetary system. Without a complete overhaul of the system inherited from 1944 by summer 2009, the failing of the current system and that of the United States at the center, will lead the whole planet to an unprecedented economic, social, political and strategic instability, and more specifically to a breakdown of the global monetary system by summer 2009.In light of the technocratic jargon and calendar of the declaration released after this first G20-meeting (totally disconnected from the speed and scope of the unfolding crisis (1)), it is more than likely that the disaster will have to happen for the fundamental problems to be seriously addressed and for the beginning of a reply to be initiated.

Four key-factors are now pushing the Bretton Woods II (2) system to collapse in the course of the year 2009:

• Fast weakening of the central players: USA, UK
• Three visions of the future of global governance will be dividing world’s largest players (United-States, Eurozone, China, Japan, Russia, Brazil) by spring 2009
• Unbridled speeding-up of the last decade’s (de-)stabilizing processes
• Increasing number of more and more violent backlashes.

Submitted by Fidel on December 3, 2008 - 6:35pm.

Latest round of socialism to prop up capitalism will cost more than: The Marshall Plan, Louisiana Purchase, moonshot, S&L bailout, Korean War, New Deal, Iraq war, Vietnam war

Submitted by SwimmingLee on December 4, 2008 - 11:44am.

Great article by Sharon Astyk on the relationship between credit cards & the overall economy -

"The first [47]was the observation that McDonalds is now the second-largest merchant vendor on credit cards - that is, people are now buying their Big Macs on plastic - in part because they don’t have the cash. Credit card balances have risen enormously in the last few weeks, as people attempt to keep going through the holidays: Commercial bank exposure via the total amount of credit card loans outstanding has risen more in the last 10 weeks than it did in the previous 10 months cobined. Moreover, the growth in the last 10 weeks — $32.3 billion, or roughly $600 million per shopping day — represents nominal growth of 9.3%, or 48.3% annualized over the last 10 weeks."

This is approximately as impactful as the inability of people to use their homes as an ATM via re-fi-cash-out transactions, which funded a significant part of the American economy in the time period 2000-2007.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

http://LASIK-FLap.com [48] ~ Website Created by Injured LASIK Patients

Submitted by M. Spector on December 4, 2008 - 12:03pm.

In the midst of a world ecological crisis, the world financial crisis has spawned a third crisis in Canada - a poltical one.

And as bad as the Canadian economy is, Canada is so far one of the least affected countries. The ecological crisis has yet to hit really home as well. Imagine the political turmoil that is to come out of the crises in the most hard-hit countries of the world!

The situation is extremely volatile, and events can happen rapidly. In Canada, the long-term quiescence of the working class leaves it in a poor position to be able to fight back against the attacks that are coming our way. The leadership of the labour and progressive social movements is at best ineffectual and at worst utterly capitulationist to the ruling class and their politicians.

Unless there is a sudden rise in labour militancy and political consciousness - and with it the sudden rise of a new layer of militant and radical leadership - the working class (in Canada and the other countries of the capitalist world) is in for historic defeats on both the economic and political fronts.

If you are reading this, you have just proved once again how annoying signatures/tag lines are. Support their abolition.

Submitted by Fidel on December 4, 2008 - 4:47pm.

M. Spector wrote:

I think labour in Canada have already suffered historic defeats with FTA, NAFTA - GATS, and at risk with MAI, TRIPS, TILMA etc. The neoliberal war on humanity is well underway since the 1980's. So when will labour in Canada make a stand?

There has been some resistance with two WTO conferences sidelined by protests at Seattle and Cancun. The neoliberal war on humanity is sometimes forced to organize their undemocratic meetings for fascist central planning in ever more remote locations around the world and with security up the wazoo to shield their hyprocrisy from democratic voices. 15 million marched against Crazy George's neoliberal goonery in Iraq and Afghanistan. People are protesting modern day enclosure everywhere around the world. It's down to a war of inches. Capital has the ability to outlast labour. Capitalists used to say that the average labourer can holdout for three weeks with personal savings in reserve. And that was when Canadians actually had a personal savings rate worth mentioning. The war on democracy continues. When will organized labour make a stand? Is it with supporting this coalition?

Submitted by M. Spector on December 4, 2008 - 5:17pm.

Fidel wrote:

When will organized labour make a stand? Is it with supporting this coalition?

How can you even ask that question? Supporting a Liberal-led coalition government is the opposite of taking a stand against neoliberal assaults on the working class. It's misleading organized labour once again into thinking that the hope of their salvation lies in replacing black cats with white ones (with a half dozen mice cheering them on).

This leads to the kind of historic defeat suffered by the US labour movement when the trade union bureaucracy threw its support behind the Democratic Party. Now US labour is powerless to take any political action outside the confines of the offices of big business politics.

Fidel, you are the undisputed babble champion of anti-Liberal rhetoric. For months now we have been treated to a steady stream of invective, vehemence, vituperation, and lots of other words with "v" in them, about the many crimes of the Liberal stoogeocracy, past and present - whatever the babble topic at hand. The haunting refrain "Liberal, Tory, same old story" still resonates in our eyeballs.

Yet suddenly, we are hearing from you about how a Liberal-led government is "worth a try", how there is no alternative™ for the NDP, how the Liberals have been defanged and neutered, and really are genuinely OK fellas and gals after all.

I never thought I'd see myself say it, but I miss that Fidel of two weeks ago.

If you are reading this, you have just proved once again how annoying signatures/tag lines are. Support their abolition.

Submitted by Fidel on December 4, 2008 - 5:56pm.

You left out the part where the proposed Liberal-led government would be, for the first time, a minority within government itself and relying on support from the NDP and Bloc on an issue by issue basis. As 19th century Westminster systems go, it's rarely been this close to resembling democracy. And even if the NDP is only in there for a 25% share, it's good advertising for the next election. Harper is now being given yet another chance to appear the good and democratic leader and to work with parliament. Harper is as much a threat to Canadian workers and Canadian interests in general as would another Liberal dynasty propped up by a series of phony majorities. If the NDP can actually participate in federal government for the first time in history, it would be a first for the party which was never supported by Bay Street money.

Submitted by M. Spector on December 4, 2008 - 8:03pm.

Fidel wrote:

If that were so, then there would be no hope of the Governor-General being convinced that Dion would have the confidence of the House. "Support on an issue-by-issue basis" is in fact business as usual in Parliament.

The Kanadian Koalition, however, is not business as usual. Read the NDP-Liberal agreement:

Dion & Layton wrote:

The rules and practices of cabinet confidentiality and solidarity will be strictly maintained.

That means the 6 NDP cabinet ministers (all leading lights in the NDP caucus) must carry the Liberal Party line on all issues. There's no "issue-by-issue basis". If you disagree with an issue, you vote for it and speak in favour of it anyway, or you're out of the cabinet.

So if the Koalition decides to break a strike or go to war against Iran or give billions to the auto industry to make SUV's, the NDP will have to support it and defend the legislation. And that lasts for at least 2½ years.

If they go back on their word and bring the Koalition down, their credibility will be zero with regard to any future political accord.

But, I digress from the topic. The world financial crisis will bring the Koalition down regardless of what the NDP intends, because it will be severe and prolonged, and shuffling deck chairs won't get rid of that iceberg off the starboard bow.

If you are reading this, you have just proved once again how annoying signatures/tag lines are. Support their abolition.

Submitted by Fidel on December 4, 2008 - 9:37pm.

I've looked at the policy accords, and they have some good things planned for laid off workers - addressing dire poverty among First Nations - new infrastructure make work projects - money for energy saving retrofits and so on. This is advanced and progressive compared with what we have now in Ottawa: the second coming of Herbert Hoover and RB Bennett roled into Steve Harper. And sure they are going to help out the auto industry. The NDP's plan all along is to tie any aid money or corporate tax incentives to investing in equipment upgrades here in Canada, training for Canadian workers - and a plan contingent on viable economy and green products. There is a difference between Harper's free money to oil companies, and McGuinty's multi-million dollar handout to car companies with no strings attached while we continue bleeding jobs, and what the NDP is proposing.

As for the financial crisis, the NDP has advocated Keynes' financial disarmament and re-regulation of the banksters for well over ten years to now. Our two Bay Street parties threw caution to the wind since about 1985, and this is where they are at today: waiting for Obama and his Liberal Democrats to make a move in order to mimickthe actions or non-actions taken in the U.S Obama has hired some of the same foxes to tend the hen house that were already there, and they already haev feathers falling out of their mouths. We need a new way, and neither of our twp oldest political parties are willing to create a made in Canada solution to much of anything.

Submitted by Fidel on December 4, 2008 - 10:55pm.

I said that again

Submitted by M. Spector on December 6, 2008 - 1:27am.

Quote:

The economy has been slowing since December 2007. The real question is whether the economy is in a recession or depression?

Recessions are like stock market corrections—after a time, equity prices rebound without government intervention. Federal Reserve interest rate cuts and stimulus tax rebates and spending have shortened the lives and eased the impact of post-World War II recessions, but those policies did not end them. The economy self corrected.

A depression is not self-correcting. Roosevelt Administration stimulus packages—huge deficit spending—eased the pain but failed to end the Great Depression. Roosevelt’s policies did not put the U.S. economy on a sustainable growth path, because New Deal policies worsened structural problems that pulled the economy down in the first place. For example, the New Deal proliferated monopoly pricing, extended the life of undersized farms, raised structural savings rates, and created a system of home lending too dependent on federally sponsored banks.

Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.

If you are reading this, you have just proved once again how annoying signatures/tag lines are. Support their abolition.

Submitted by Fidel on December 6, 2008 - 3:46am.

M. Spector wrote:

Slouching Toward a Depression? Peter Morici

Roosevelt’s policies did not put the U.S. economy on a sustainable growth path,

FDR's policies were too late to save thousands of U.S. banks from going tits up between 1929 and 1932 after decades of deregulated finance, insurance and real estate. FDR's firewalls of regulation insulated banks from further gambling losses. Banks went back to banking. I've read about the government farm collectives in papers from Steinbeck's museum in Salinas. There were hungry Americans roaming the country. There was no social security then or UI-EI-O. A dollar a day was the average wage, and farmers couldnt afford to upgrade farm machinery. The Soviets, too, had no successful agriucutlural model to follow anywhere in the world at that point in time. Markets were not self-correcting then either. There wasnt much of a public sector economy then compared to FDR forward. The 30 year experiment in laissez-faire capitalism had run its course in North America. Morici sounds like an apologist for Herbert Hoover who himself claimed his government practiced Keynesian economics before its time. That just wasnt true.

And then there was Nazi Germany borrowing heavily and spending liberally for many years. They brought down higher levels of unemployment than occurred in the U.S. in less time. There was more resistance to New Deal Keynesianism in the U.S., and that stalled the recovery. That and the fact that U.S. industrialists were busy investing in Hitler's Germany while the recovery was creeping along in the US

Quote:

The dollar is too strong against the Chinese yuan, Japanese yen and other Asian currencies.

Now we know Morici isn't a Keynesian. Because the Asian economies have been beating their brains in in the U.S. with Keynesian finance and banking and visible hand policies for managing currency. "Fix banking and trade deficits", what does he mean by that?

Quote:

The choices for the new president are simple. It’s either renaissance or decline. Fix the banks, trade with China and energy policy or become America’s Nero.

Sure, after conservatives have defunded education and research into nuclear power physics in decline since the 1980s, that's a tall order for one corporate hireling shoved into the driver's seat while looting on Wall Street continues unabated. It looks more like dark ages than renaissance ahead

Submitted by enemy_of_capital on December 10, 2008 - 10:26pm.

Keynes was a bloody fool and this proves it. Neo liberalism in the U.S. and abroad is melting dramatically and Keynesian schools in Scandinavia and in other upstanding social democracies this is shown true to it si not immune while still governed by the laws of Capitalism (wether non or pro interventionist in nature). Marx predicted these exact crisis occuring in 1848! he further than that he didnt just tell us these slumps are inevitable but he told us why. Read Capital the people of eastern Germany are doing so in record numbers and more and more people are turning to the Marxist ideas that were just months ago only discussed in rooms of dozens now thousands are striving to learn about what is happening and the sollutions to their toil.

www.marxist.com

www.marxist.ca [59]

www.marxists.org [60]

Submitted by Fidel on December 10, 2008 - 10:43pm.

Keynes is associated moreso with Marx, Polanyi, Schumpeter etc

Milton Friedman was a neoliberal duck quacking for von Hayek, Locke, Smith, Hobbes etc

The world is on the road to serfdom today mainly due to the failure of neoliberal policies and the failure of old world thinking to deal with economic and environmental crises brought on by a single human characteristic, self-interest, that has been warped and magnified into appalling greed by unfettered financial capitalism. Their political lust for power and world domination since the end of cold war knows no bounds today. Kapitalism is consuming itself ahead of schedule.

Submitted by Doug on December 11, 2008 - 10:21pm.

Tragedy! DJ forced to sell gold teeth!

Anthony Ghosh, aka DJ Talent, hopes to raise about £30,000 by selling all 28 of his gold crowns.

The 30-year-old from Beckenham, south London, says he has seen a significant drop in vinyl sales.

"Records aren't really shifting these days," said the electro house DJ. "It's been like this for a couple of months now and it's not getting any better."

Submitted by Fidel on December 12, 2008 - 2:43am.

Capitalist Fools

> by Prof. Joseph E. Stiglitz

Quote:

Behind the debate over remaking U.S. financial policy will be a debate over who’s to blame. It’s crucial to get the history right, writes a Nobel-laureate economist, identifying five key mistakes—under Reagan, Clinton, and Bush II—and one national delusion.

There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history-a debate over the causes of our current situation. The battle for the past will determine the battle for the present. So it's crucial to get the history straight. . .

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said.

Submitted by M. Spector on December 12, 2008 - 4:33pm.

Brace yourselves for the first wave of the tsunami, as the US auto giants start filing for bankruptcy...

This is going to be painful.

As René Magritte would say, "This is not a tag line". Only he'd say it in French. You may find it rather annoying to have to discipline yourself to ignore parts of certain other people's posts - but not everyone's. Wouldn't it be better to abolish them?

Submitted by KenS on December 12, 2008 - 9:14pm.

No Big 3 bankruptcies just yet.

Submitted by Frustrated Mess on December 12, 2008 - 10:59pm.

Quote:

The shocking revelation that prominent investment manager Bernard Madoff's hedge fund, Ascot Partners, was a giant scam will intensify redemptions from scores of other hedge funds that will be forced to liquidate holdings and increase downward pressure on stock prices.

$50 billion - POOF! - gone [67].

Submitted by Bubbles on December 12, 2008 - 11:44pm.

"$50 billion - POOF! - gone."

How can it be gone when it was never there in the first place. The current scam is to get compensation (from the state) for billions that never existed. For losses that never had been earned.

Submitted by Fidel on December 13, 2008 - 12:16am.

Britain more alert than Washington to the depths of the crisis

by William Krehm

Quote:

Let us consult The New York Times (9/10, “British Government Takes Different Route to Rescue the Nations Banks” by Landon Thomas Jr. and Julia Werdigier): “London In a bold move to restore confidence, Britain announced an unprecedented £50 billion government lifeline for the nations banks Wednesday that it hailed as a quicker solution to the credit crisis than a $700 billion American plan to buy impaired mortgage assets from troubled financial institutions.

“Britain offered banks like Royal Bank of Scotland, Barclays and HSBC Holdings up to £50 billion or $88 billion, to shore up their capital in exchange for preferred shares. It will also provide a guarantee of about $438 billion to help banks finance debt. The Bank of England will double the amount it lends banks under its special liquidity plan to $350 billion.

“Prime Minister Gordon Brown, whose political legacy presented the British strategy as a means to address the heart of the crisis. This is not the American plan, he said Wednesday. Our plan is to buy shares in the banks themselves and therefore we will have a stake in the banks. We are not simply giving money.

“In a further jab at the American approach, shaped by Treasury Secretary Henry M. Paulson Jr., Mr. Brown added that the time for buying devalued related assets had passed. Indeed, although Mr. Paulson would restore the financial industry by purging weak holdings from bank balance sheets, many analysts believe he will need to consider recapitalization of American banks.

As far as I can tell, Hank Paulson wants U.S. taxpayers to buy shit from Wall Street at prices that would realize pre-crisis profit levels for the banks. It looks as if Brown's plan, and Hank Paulson's plunge protection plan, are two totally different approaches with Britain's bailout looking more like nationalisation of banks, if HSBC, Barclays, Liz and Phil's bank etc accept taxpayers' money in exchange for preferred shares and government oversight of private banks.

Submitted by Frustrated Mess on December 13, 2008 - 12:29am.

It is still a massive give away, a transfer of wealth, from the working and middle-classes.

Submitted by Fidel on December 13, 2008 - 12:44am.

Except that U.S. taxpayers wont have any ownership in Wall Street banks or any say in how they do business with Hank Paulson's socialism to prop up capitalism

Submitted by M. Spector on December 14, 2008 - 8:46pm.

John Bellamy Foster speaks on "The Great Financial Crisis: Causes and Consequences" (video)

Submitted by Fidel on December 15, 2008 - 8:55pm.

Federal Reserve sets stage for Weimar-style Hyperinflation

Quote:

The Federal Reserve has bluntly refused a request by a major US financial news service to disclose the recipients of more than $2 trillion of emergency loans from US taxpayers and to reveal the assets the central bank is accepting as collateral. Their lawyers resorted to the bizarre argument that they did so to protect 'trade secrets.' Is the secret that the US financial system is de facto bankrupt? The latest Fed move is further indication of the degree of panic and lack of clear strategy within the highest ranks of the US financial institutions. Unprecedented Federal Reserve expansion of the Monetary Base in recent weeks sets the stage for a future Weimar-style hyperinflation perhaps before 2010. . .

In response to the deepening crisis, the Bernanke Fed has decided to expand what is technically called the Monetary Base, defined as total bank reserves plus cash in circulation, the basis for potential further high-powered bank lending into the economy. . .

Submitted by M. Spector on December 17, 2008 - 10:17am.

John Bellamy Foster and Fred Magdoff, in their forthcoming book, The Great Financial Crisis: Causes and Consequences wrote:

Yet, despite the attempt to pour money into the system to effect the resumption of the most basic operations of credit, the economy found itself in liquidity trap territory, resulting in a hoarding of cash and a cessation of inter-bank loans as too risky for the banks compared to just holding money. A liquidity trap threatens when nominal interest rates fall close to zero. The usual monetary tool of lowering interest rates loses its effectiveness because of the inability to push interest rates below zero. In this situation the economy is beset by a sharp increase in what Keynes called the “propensity to hoard” cash or cash-like assets such as Treasury securities.

Fear for the future given what was happening in the deepening crisis meant that banks and other market participants sought the safety of cash, so whatever the Fed pumped in failed to stimulate lending. The drive to liquidity, partly reflected in purchases of Treasuries, pushed the interest rate on Treasuries down to a fraction of 1 percent, i.e., deeper into liquidity trap territory.

Monthly Review

Submitted by martin dufresne on December 17, 2008 - 11:06am.

Fascinating summary, thanks!

Submitted by M. Spector on December 17, 2008 - 7:40pm.

You're welcome.

Foster and Magdoff's analysis seems to be borne out by this news item:

Quote:

The Federal Reserve moved deeper into uncharted waters on Tuesday, heralding further unconventional measures to support the economy as it slashed interest rates from 1 per cent to virtually zero.

In a historic statement, the US central bank said it would target a record low interest rate, expressed as a range of between zero and 0.25 per cent. It said it expected to keep rates at ultra-low levels "for some time" and vowed to use "all available tools to promote the resumption of sustainable growth and to preserve price stability".…

The statement came as US data showed prices fell a record 1.7 per cent in November - with no rise even in core prices excluding energy and food - raising fears about deflation. Housing starts also fell further….

The Fed said the outlook for economic activity had "weakened further" and acknowledged that "inflationary pressures have diminished appreciably".

The decision to set a range for interest rates reflects an admission that the US central bank cannot tightly control the actual rate that prevails in the market in current conditions.

Barack Obama, president-elect, told reporters that the fact that the Fed had no more room to cut rates underscored the case for a big fiscal stimulus. "We are running out of the traditional ammunition that's used in a recession, which is to lower interest rates," he said.

Financial Times, Dec. 16, 2008

Submitted by M. Spector on December 17, 2008 - 8:44pm.

Quote:

The collapse of market fundamentalism in economies everywhere is putting the Chicago School theology on trial. Its big lie has been exposed by facts on two levels. The Chicago Boys' claim that helping the rich will also help the poor is not only exposed as not true, it turns out that market fundamentalism hurts not only the poor and the powerless; it hurts everyone, rich and poor, albeit in different ways. When wages are kept low to fight inflation, the low-wage regime causes overcapacity through over investment from excess profit. And monetary easing under such conditions produces hyperinflation that hurts also the rich. The fruits of Friedman test are in - and they are all rotten.

Henry C K Liu

Submitted by M. Spector on December 27, 2008 - 4:25pm.

Capitalism's Crisis Through a Marxian Lens

As usual, Marxist economic analysis makes so very much sense, you have to wonder why anybody bothers with the other kind.

- - -

Another Marxist analysis [79] (15 pp., .pdf)

Submitted by M. Spector on December 20, 2008 - 11:55pm.

Americans Got Punk'd on the Bailout (Video)

Submitted by Fidel on December 21, 2008 - 1:37am.

Ellen Brown on the NY Fed's "trade secrets", free money, and the prestige of working for the government in Europe

She's saying that socialism is viable

Submitted by M. Spector on December 22, 2008 - 5:01pm.

Quote:

Only a few weeks after world leaders vowed at a Washington summit to reject trade protectionism and adhere to free-market principles as they combat the global financial crisis, a host of nations are already breaking that promise.

Moving to shield battered domestic manufacturers from foreign imports, Indonesia is slapping restrictions on at least 500 products this month, demanding special licenses and new fees on imports. Russia is hiking tariffs on imported cars, poultry and pork. France is launching a state fund to protect French companies from foreign takeovers. Officials in Argentina and Brazil are seeking to raise tariffs on products from imported wine and textiles to leather goods and peaches, according to the World Trade Organization.

The list of countries making access to their markets harder potentially includes the United States, where critics are calling the White House [83]'s $17.4 billion bailout of the U.S. auto industry an unfair government subsidy that would put foreign competitors at a disadvantage.

Though still relatively narrow in scope, the moves, observers warn, in the coming months may grow into a broader wave of protectionism. That could worsen the global financial crisis by further choking world trade, which is already facing its first decline since 1982 as the world economy sharply slows and demand dries up.

In hard times, analysts say, nations are more inclined to take steps that inhibit trade, often with dire consequences. Trade restrictions imposed by countries trying to protect domestic industries in the 1930s, for instance, escalated into a global trade war that deepened and prolonged the Great Depression.

Washington Post [84]

Submitted by Toby Fourre on December 22, 2008 - 8:07pm.

Over the past couple of weeks, I have read expert opinion that the financial crisis started in 2007. Now, I suppose I should have expected that, but has there been a conspiracy to keep it quiet? Or is it that the inmates are running the asylum?

Submitted by Fidel on December 22, 2008 - 8:20pm.

Toby Fourre wrote:

Yes, it seems not so long ago that Ottawa was telling us we are so lucky to have the U.S. as a trade partner, and that NAFTA and now deep integration would lead to unprecedented prosperity for Canadians. Now they seem to be distancing themselves from the neoliberal speak somewhat.

World Faces "Total" Financial Meltdown: Bank of Spain Chief

Quote:

December 22, 2008 "AFP [87]" -- -- The governor of the Bank of Spain on Sunday issued a bleak assessment of the economic crisis, warning that the world faced a "total" financial meltdown unseen since the Great Depression.

"The lack of confidence is total," Miguel Angel Fernandez Ordonez said in an interview with Spain's El Pais daily.

"The inter-bank (lending) market is not functioning and this is generating vicious cycles: consumers are not consuming, businessmen are not taking on workers, investors are not investing and the banks are not lending. . .

"This is the worst financial crisis since the Great Depression" of 1929, he added.

Submitted by M. Spector on December 22, 2008 - 8:21pm.

Toby Fourre wrote:

Over the past couple of weeks, I have read expert opinion that the financial crisis started in 2007. Now, I suppose I should have expected that, but has there been a conspiracy to keep it quiet?

I don't think it was much of a secret, actually.

Wikipedia sez:

Quote:

The subprime mortgage crisis is an ongoing financial crisis triggered by a dramatic rise in mortgage delinquencies and foreclosures in the United States, with major adverse consequences for banks and financial markets around the globe. The crisis, which has its roots in the closing years of the 20th century, became apparent in 2007 and has exposed pervasive weaknesses in financial industry regulation and the global financial system.

Submitted by Fidel on December 23, 2008 - 8:14am.

I think it's a pyramid of money and near money and financial speculation, and what amounts to a mountain of gambling debts by everyone from bankers to speculators to insurance and holding companies to pension funds, and especially since about 1987 or so. There are trillions of dollars in iou's floating around the world and not nearly enough real money in circulation to back it up. I dont think bad mortgage debts are at the root cause but are more a trigger for the general collapse of much larger financial house of cards. But financial capitalism was supposed to replace industrial capitalism as a way of attaining pre-1980s profit margins. By the neoliberal order of things, productive labour economies were abandoned by capitalists in favour of investing in weird new money markets. And it was all supported by computerized betting using casino mathematics to drain stock markets of money. And "wealth creation" became a mere matter of investing in something and waiting for prices to rise. Some say the problem was that everyone was betting against everyone else using the same math formulas. When one wins big, so does everyone betting the same way. But when one loses big time, so do they all. Capitalism apparently does not work well if there is optimism in every country. Capitalism, like the casino's house rules, says there should be losers with every bet. And I think the problem with allowing money markets to influence soevereign governmental policies world-wide is that important decisions are made by a relative handful few people playing with large amounts of money. It's not very democratic.

Submitted by M. Spector on December 23, 2008 - 11:26am.

Welcome to the "Third Slump"

Excerpted from a very informative and perceptive article:

Phil Hearse wrote:

Ernest Mandel called the market crash and global recession of 1974-5 the ``second slump'' - the first one being of course that of the 1930s, initiated by the stockmarket crash of 1929. We now know that the crash of 2008-9 is more severe, and will have more devastating consequences than that in the 1970s; whether it will be as bad as the 1930s slump we have yet to see. But it is now clear that this is a fundamental crisis of the neoliberal ``mode of regulation'' which now is under severe pressure and probably cannot survive in its present form….

This article aims to give a brief explanation of why the crash has happened; to situate it in the history of development of capitalism; to discuss possible consequences, especially those for the working class in Britain and internationally; and to suggest political implications for the radical left….

The 1930s recession, despite the ``New Deal'' in the United States, was only overcome by a world war during which huge sections of the economy in Britain and the US were nationalised. By 1938 there were 10 million unemployed in the US. It was only rearmament in the war that overcame the slump. The post-war settlement, Keynesianism, combined a mixed economy with a significant state sector, together with new social security arrangements, the ``welfare state''. These arrangements led to the so-called ``Golden Age'', the post-war boom based on the mass production of consumer goods which entered into crisis at the end of the 1960s and was plunged into full-scale crisis in 1974-5.

Like all capitalist crises, that of the 1970s was a result of a decline in the rate of profit. Keynesianism was based on the idea that state spending and corresponding state budget deficits could be used to overcome the secular trend in capitalism towards declining profit levels. But state spending generated unsustainable inflation and mounting budget deficits caused big tax rises that impacted on the spending power of the working class. In the end, Keynesianism could not prevent profit levels declining.

After the collapse of the Keynesian consensus, the capitalist class internationally attempted to push back workers' living standards through austerity and tight money - so-called ``monetarism''. Only gradually into the mid-1980s did a new mode of regulation - neoliberalism - emerge. This was characterised by the de-regulation of money markets, the dominance of finance capital, privatisation and the ``financialisation'' of all services and utilities, and a strict tying of the fortunes of companies to the value of their shares (stock) on the stock markets. It is this mode of regulation that has now literally gone into massive crisis: it is an open question whether the dominance of finance capital can be rescued. It would take at least a generation for lenders and borrowers to behave again as they did in the 1990s and first part of this century.

The current financial losses, and those still to come, make a neoliberal, debt-led, reflation highly unlikely. The problem is that the bourgeoisie internationally has already tried a more regulated form of capitalism, Keynesianism. Both Keynesianism and neoliberalism have failed to sustain growing profit without going into periodic crisis.

The crisis of neoliberalism

So why did this mode of regulation go into a tail spin? In fact the tendency towards financial crisis inherent in neoliberalism was already announced by the stock market crash of 1987, the Asian crash of 1997 and the bursting of the ``dot.com'' boom in 2000. Indeed, it is worth remembering that when the present plunge of world markets began in late 2007, they had nothing like recovered their losses in 2000.

The mechanisms of the crash have been widely discussed. The transition from the Keynesian mixed economy welfare state to neoliberalism entailed a new dominance of finance capital. The normal working of finance capital is basically money lending for interest, what in the Middle Ages was called ``usury''. In the furious competition between money lenders more and more obscure financial instruments are exchanged and some of these turn out to be worthless bits of paper - fictitious capital, like some of the US sub-prime mortgages. When however worthless lending is bundled into packages with performing lending, debts that are really being paid back, the integrity of all debt is called into question.

Moreover the frenzy to lend, make huge profits and thus big bonuses for bankers, leads banks and other financial institution to lend way above what they have by way of a capital base. They do this by borrowing money and then lending it for a profit and then paying it back, still retaining part of the interest for themselves. But if the debt turns out to be insecure, they are unable to pay it back. So they become bankrupt and are taken over or bailed out by a government.

Source

Submitted by SwimmingLee on December 23, 2008 - 12:45pm.

Although he was a Republican senator, Fred Thompson has created a mostly non-denominational video about the US response to the financial "crisis". He pours on the satire, but his statements are factual ~

http://www.theospark.net/2008/12/fred-thompson-explains-bailouts.html

He basically points out how the US is resorting to "more of the same" behavior that created the problem in the first place.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

http://LASIK-FLap.com ~ Website Created by Injured LASIK Patients

Submitted by M. Spector on December 23, 2008 - 3:41pm.

Why should anybody on babble give a shit what right-wing libertarian Fred Thompson says?

He's using this crisis as an opportunity to bash "liberal" economists and argue for smaller government, lower taxes, and lower social expenditures. In other words, abolition of the welfare state and the social safety net.

I don't recall Thompson complaining about the US spending trillions on the military, the wars, and the security establishment. It's easy for him to attack government spending, now that it's "unpopular". He's pandering.

He tries to pretend that the crisis could have been avoided if only the government hadn't overspent and over-borrowed. In actual fact, the crisis is a crisis of capitalism, not government. Its causes were beyond the control of governments, just as surely as there is now no governmental "cure" for it.

Don't listen to right-wing demagogues if you want to know why capitalism has fucked up. They haven't got a clue.

Submitted by Doug on December 23, 2008 - 8:10pm.

Former US Treasury Secretary John Snow admits to an oopsie:

“The Bush administration took a lot of pride that homeownership had reached historic highs,” Mr. Snow said in an interview. “But what we forgot in the process was that it has to be done in the context of people being able to afford their house. We now realize there was a high cost.”

http://www.nytimes.com/2008/12/21/business/21admin.html?_r=1&em

Submitted by Fidel on December 23, 2008 - 8:23pm.

Home ownership, yeah right. Looks like neoliberalism was a ruse for the real owners to separate the working class from their money as well as their homes. Remember Thatcher the snatcher.

Disowned by the ownership society - Naomi Klein, Feb 2008

Submitted by Doug on December 23, 2008 - 9:58pm.

The founder of an investment fund that lost $1.4-billion (U.S.) with Bernard Madoff was discovered dead Tuesday after committing suicide at his Manhattan office, marking a grim turn in a scandal that has left investors around the world in financial ruin.

René-Thierry Magon de la Villehuchet, 65, was found sitting at his desk at about 8 a.m. with both wrists slashed, New York Police Department spokesman Paul Browne said. A box cutter was found on the floor along with a bottle of sleeping pills on his desk. No suicide note was found.

http://business.theglobeandmail.com/servlet/story/RTGAM.20081223.wmadoff1223/BNStory/Business/home

No suicide note required, I suppose.

Submitted by M. Spector on December 24, 2008 - 4:19pm.

Walden Bello on "Global Social Democracy"

GSD is a concept I was not familiar with until I read this article.

Quote:

A new national Keynesianism along Sarkozyan lines, however, is not the only alternative available to global elites. Given the need for global legitimacy to promote their interests in a world where the balance of power is shifting towards the South, western elites might find more attractive an offshoot of European Social Democracy and New Deal liberalism that one might call "Global Social Democracy" or GSD.

Even before the full unfolding of the financial crisis, partisans of GSD had already been positioning it as alternative to neoliberal globalization in response to the stresses and strains being provoked by the latter. One personality associated with it is British Prime Minister Gordon Brown, who led the European response to the financial meltdown via the partial nationalization of the banks….

Joining Brown in articulating the Global Social Democratic discourse has been a diverse group consisting of, among others, the economist Jeffrey Sachs, George Soros, former UN Secretary General Kofi Annan, the sociologist David Held, Nobel laureate Joseph Stiglitz, and even Bill Gates. There are, of course, differences of nuance in the positions of these people, but the thrust of their perspectives is the same: to bring about a reformed social order and a reinvigorated ideological consensus for global capitalism.

Among the key propositions advanced by partisans of GSD are the following:

• Globalization is essentially beneficial for the world; the neoliberals have simply botched the job of managing it and selling it to the public;

• It is urgent to save globalization from the neoliberals because globalization is reversible and may, in fact, already be in the process of being reversed;

• Growth and equity may come into conflict, in which case one must prioritize equity;

• Free trade may not, in fact, be beneficial in the long run and may leave the majority poor, so it is important for trade arrangements to be subject to social and environmental conditions;

• Unilateralism must be avoided while fundamental reform of the multilateral institutions and agreements must be undertaken - a process that might involve dumping or neutralizing some of them, like the WTO's Trade-Related Intellectual Property Rights Agreement (TRIPs);

• Global social integration, or reducing inequalities both within and across countries, must accompany global market integration;

• The global debt of developing countries must be cancelled or radically reduced, so the resulting savings can be used to stimulate the local economy, thus contributing to global reflation;

• Poverty and environmental degradation are so severe that a massive aid program or "Marshall Plan" from the North to the South must be mounted within the framework of the "Millennium Development Goals";

• A "Second Green Revolution" must be put into motion, especially in Africa, through the widespread adoption of genetically engineered seeds.

• Huge investments must be devoted to push the global economy along more environmentally sustainable paths, with government taking a leading role ("Green Keynesianism" or "Green Capitalism");

• Military action to solve problems must be deemphasized in favor of diplomacy and "soft power," although humanitarian military intervention in situations involving genocide must be undertaken.

The Limits of Global Social Democracy

Global Social Democracy has not received much critical attention, perhaps because many progressives are still fighting the last war, that is, against neoliberalism. A critique is urgent, and not only because GSD is neoliberalism's most likely successor. More important, although GSD has some positive elements, it has, like the old Social Democratic Keynesian paradigm, a number of problematic features.

A critique might begin by highlighting problems with four central elements in the GSD perspective.

First, GSD shares neoliberalism's bias for globalization, differentiating itself mainly by promising to promote globalization better than the neoliberals. This amounts to saying, however, that simply by adding the dimension of "global social integration," an inherently socially and ecologically destructive and disruptive process can be made palatable and acceptable….

Second, GSD shares neoliberalism's preference for the market as the principal mechanism for production, distribution, and consumption, differentiating itself mainly by advocating state action to address market failures….

Third, GSD is a technocratic project, with experts hatching and pushing reforms on society from above, instead of being a participatory project where initiatives percolate from the ground up.

Fourth, GSD, while critical of neoliberalism, accepts the framework of monopoly capitalism, which rests fundamentally on deriving profit from the exploitative extraction of surplus value from labor, is driven from crisis to crisis by inherent tendencies toward overproduction, and tends to push the environment to its limits in its search for profitability. Like traditional Keynesianism in the national arena, GSD seeks in the global arena a new class compromise that is accompanied by new methods to contain or minimize capitalism's tendency toward crisis. Just as the old Social Democracy and the New Deal stabilized national capitalism, the historical function of Global Social Democracy is to iron out the contradictions of contemporary global capitalism and to relegitimize it after the crisis and chaos left by neoliberalism. GSD is, at root, about social management….

Reveille for Progressives

While progressives were engaged in full-scale war against neoliberalism, reformist thinking was percolating in critical establishment circles. This thinking is now about to become policy, and progressives must work double time to engage it. It is not just a matter of moving from criticism to prescription. The challenge is to overcome the limits to the progressive political imagination imposed by the aggressiveness of the neoliberal challenge in the 1980s combined with the collapse of the bureaucratic socialist regimes in the early 1990s. Progressives should boldly aspire once again to paradigms of social organization that unabashedly aim for equality and participatory democratic control of both the national economy and the global economy as prerequisites for collective and individual liberation.

Like the old post-war Keynesian regime, Global Social Democracy is about social management. In contrast, the progressive perspective is about social liberation.

Submitted by Fidel on December 25, 2008 - 9:02am.

A somewhat interesting piece from Belize from beginning of the month

The unraveling of the world’s economy

Quote:

In his column in the Telegraph of November 27th , Ambrose Evans-Pritchard made it very clear that, as the global economic collapse enters its final stage, that the Anglo-Dutch financial oligarchs will only tolerate two versions of the end. “This gamble (of financial excesses) was likely to end in one of two extreme ways: with either a resurgence of (shock or hyper) inflation; or a downward spiral into depression, civil disorder, and possibly wars.” . .

The fact is that these moneys were never intended to be used to “stimulate” the US economy, but to keep the illusion of a solvent banking system and, as Mark Carney, the Governor of the Bank of Canada, said November 30th in the Financial Times, “act as market-makers of last resort”, that is to madly try to bail-out the entire $ 1,400 trillion derivatives markets. . .

But there is another choice, the choice that Mr. Ambrose Evans-Pritchard says (November 18th Blog) cannot be “on the table’ – a New Bretton Woods System. This is the only way to save humanity from a collapse of civilization by putting the entire global financial system through bankruptcy reorganization.However, to do something as drastic as putting the global financial system through bankruptcy reorganization means to cancel the derivatives contracts, and this itself means war, as the Anglo-Dutch financial oligarchs will never voluntarily give up their perceived wealth and real power.

Globo FDR style bankruptcy reorganization? A pox on their financial houses? That sounds interesting.

Submitted by 500_Apples on December 25, 2008 - 1:49pm.

Conservatives used to whine about millions on miscellaneous government spending.

Then they had billion dollar bailouts for their friend. And then, the trillion.

Will the Quadrillion enter the economics lexicon?

1 Quadrillion = 1, 000, 000, 000, 000, 000

Submitted by Doug on December 26, 2008 - 10:29pm.

I think the Financial Times and Socialist Worker got their wires crossed.

The humbling of the financial sector should put an end to a bonus culture that rewards recklessness. It should also bring to a close the two decades in which investment banking and its associated industries have absorbed disproportionate numbers of skilled graduates. From now on, those who wish to package expensive products that they do not fully understand can work at the gift-wrapping department in Harrods. As for those of real talent, we can but hope to see some of them seek careers in research, teaching, healthcare and even manufacturing – the sector whose economic contribution is so often overshadowed by financial services....The Anglo-Saxon capitalist model has been sorely tested in the past 12 months. Governments have been forced to prop up the banks and tempted to erect scaffolding around industrial titans. We may come to miss some of the dynamism and inventiveness of unfettered capitalism, but we will not miss glib free-market fundamentalism.

http://www.ft.com/cms/s/0/70c6cb06-d11e-11dd-8cc3-000077b07658.html?nclick_check=1

It just goes to show that at a certain point the truth becomes apparent to everyone.

Submitted by Fidel on December 27, 2008 - 2:23am.

Japan Should Scrap U.S. Debt; Dollar May Plummet, Mikuni Says

Quote:

Dec. 24 (Bloomberg) -- Japan should write-off its holdings of Treasuries because the U.S. government will struggle to finance increasing debt levels needed to dig the economy out of recession, said Akio Mikuni [101], president of credit ratings agency Mikuni & Co.

The dollar may lose as much as 40 percent of its value to 50 yen or 60 yen from the current spot rate of 90.40 today in Tokyo unless Japan takes “drastic measures” to help bail out the U.S. economy, Mikuni said. Treasury yields, which are near record lows, may fall further without debt relief, making it difficult for the U.S. to borrow elsewhere, Mikuni said.

“It’s difficult for the U.S. to borrow its way out of this problem,” Mikuni, 69, said in an interview with Bloomberg Television broadcast today. “Japan can help by extending debt cancellations.”

A Marshall Plan for the U.S. ?

Submitted by Doug on December 28, 2008 - 7:16pm.

How the financial crisis affects a brick factory - and more - in Bangladesh:

First, the downturn in London hurt Bangladeshi-owned British businesses that had been sending capital to farmer relatives in Sylhet.

Then a plunge in exchange rates and a rise in commodity prices all but killed any demand for bricks or the people who work with them, and a local credit squeeze caused by the crash of interbank lending prevented her from getting a $400 loan to launch a new business.

“Because of what is happening over there in London, a lot of us are having to go back to planting rice and living in small houses,” Ms. Begum says.

http://business.theglobeandmail.com/servlet/story/RTGAM.20081226.wrcover27/BNStory/Business/home

Submitted by Fidel on December 28, 2008 - 9:00pm.

And there are only 150 million people in Bangladesh. Ukraine has been hit hard by recession.

US: Christmas marked by declining sales as unemployment climbs IMF economist warns of “Great Depression”

Quote:

Early figures confirm an extremely bleak holiday shopping season in the US, as broad sections of the population have been hit hard by a deepening economic recession.

Total retail sales, excluding automobiles, fell 8 percent in December through Christmas Eve over the same period last year, according to MasterCard Inc.'s SpendingPulse. Sales for November fell 5.5 percent. If gasoline is excluded, the drop was a more modest 2 to 4 percent.

The holiday numbers come a few days after a Labor Department report showed that the number of US workers filing for first-time unemployment benefits increased 30,000 to 586,000 last week. The four-week moving average rose to 558,000. Both figures are the highest they have been since November 1982.

The sales declines are two to five times more severe than most analysts expected. It is the first time that holiday sales have fallen in the US in at least 40 years. SpendingPulse noted in its report that the 2008 shopping season was "one of the most challenging...we've faced in modern times."

The figures are based on sales from the company's credit card, with estimates for other forms of spending.

Declines were deep and broad-based, affecting all types of goods. Sales of expensive luxury goods, including jewelry, fell 34.5 percent. Apparel sales declined about 20 percent, and electronics goods fell by 26 percent. The decline in electronic sales was driven in part by a sharp fall in sales of more expensive products, as consumers cut back on large purchases and have had greater difficulty getting credit. . .

Submitted by Doug on December 28, 2008 - 9:35pm.

And that's before Russia turns the gas off for non-payment.

Submitted by Fidel on December 28, 2008 - 9:47pm.

I think the Russians would extend them a line of credit for the fuel, unless Ukraine was to allow North Atlantic Treaty Org to install nuclear weapons on Ukrainian soil. Then things might get colder.

Submitted by Doug on December 29, 2008 - 2:00pm.

Corporations spending on one thing at least - security:

As millions of people have lost their jobs or sizable chunks of their retirement savings, some corporate titans are increasingly worried that angry customers or former workers might try to do them physical harm, Ricci said.

"I don't want to get into specific stories, but I am hearing, 'We're worried about our security, because in these times you have to be,' " he said.

http://www.boston.com/business/articles/2008/12/29/in_a_recession_executives_make_quick_getaways/

Submitted by Frustrated Mess on December 29, 2008 - 3:00pm.

Quote:

Lehman Brothers Holdings Inc's (LEHMQ.PK: Quote, Profile [108], Research [109]) emergency bankruptcy filing wiped out as much as $75 billion of potential value for creditors, The Wall Street Journal reported on Monday, citing an analysis by the bank's restructuring advisers.

Reuters [110]

Submitted by LeighT on December 29, 2008 - 10:40pm.

"The S&P/TSX composite index has plunged 37.5 per cent since the start of 2008 while the Dow industrials have lost 36.2 per cent, the biggest drop since 1931 when the Great Depression sent the blue-chip average reeling 40.6 per cent.

The Standard & Poor's 500 index is set to record the biggest drop since its creation in 1957, down 40.9 per cent year-to-date."

http://www.theglobeandmail.com/servlet/story/RTGAM.20081229.wtsx1229/BNStory/Business

meanwhile the globe is implying that come mid-Jan. when/if the ABCP restructured notes come out, there may be some unfreezing of bank-credit.

http://business.theglobeandmail.com/servlet/story/RTGAM.20081229.wABCPdbrs1229/BNStory/Business/home?cid=al_gam_mostview [112]

as if that could or would deal with the larger problem/s.

Submitted by Doug on December 30, 2008 - 7:47pm.

Nobody wants the house!

With nearly one in six homes worth less than the mortgage owed on it, according to Moody's Economy.com, divorce lawyers and financial advisers around the country say the logistics of divorce have been turned around. "We used to fight about who gets to keep the house," said Gary Nickelson, president of the American Academy of Matrimonial Lawyers. "Now we fight about who gets stuck with the dead cow."

http://www.huffingtonpost.com/2008/12/30/housing-market-divorce-tw_n_154182.html

Submitted by Ward on December 30, 2008 - 11:39pm.

http://www.cfos100.com/research/excitability.php

LETTING THE SOLAR SYSTEM WORK FOR YOU.

It all has to do with the lack of sunspots this year!

Submitted by Frustrated Mess on December 31, 2008 - 12:01am.

Uh, huh.

Submitted by Fidel on December 31, 2008 - 2:06am.

United States National Debt Cycles and the Cosmetic Leaders Responsible

Submitted by Doug on December 31, 2008 - 2:19am.

Fidel wrote:

United States National Debt Cycles and the Cosmetic Leaders Responsible

I knew that Max Factor was responsible!

Submitted by Fidel on December 31, 2008 - 2:27am.

HA!@

Submitted by M. Spector on December 31, 2008 - 4:37pm.

This will put some perspective on the extent of the U.S. corporate welfare bailout - at least to date:

Quote:

In 1803, President Thomas Jefferson paid France $15-million for land that now forms 25 per cent of the United States. Adjusted for inflation, the Louisiana Purchase cost $217-billion in 2008 currency.

From 1932 through 1939, President Roosevelt's expenditures on the New Deal consumed $32-billion - or $500-billion in today's currency.

In the years following the Second World War, the U.S. spent $12.7-billion on the Marshall Plan reconstruction of war-torn Europe - or $115-billion in today's currency.

From early 1950 through 1953, the U.S. spent $54-billion to wage the Korean War - or $454-billion in today's currency.

From 1961 through July 16, 1969, the U.S. spent $36-billion on President John F. Kennedy's race to the moon - or $237-billion in today's currency. (President Kennedy had promised to put an American on the lunar surface "before the end of this decade.")

From the late 1980s through the early 1990s, the U.S. spent $154-billion to compensate the clients of 747 bankrupt S&L (savings and loans) institutions - or $256-billion in today's currency.

In the Vietnam War (1955-1975), the U.S. spent $111-billion - or $698-billion in today's currency.

In the Persian Gulf war (1990-1991), the U.S. spent $550-billion to oust Iraqi dictator Saddam Hussein from Kuwait - or $597-billion in today's currency.

Add the costs of all these events together and you get a total - in today's currency - of precisely $3-trillion, which is close to the actual deployment of bailout money in the economic meltdown thus far: $2.8-trillion. But this $2.8-trillion is only a small part of the $8.7-trillion that various U.S. agencies and institutions have pledged. To accumulate enough historic spending to match this higher number, you would need to throw the most costly enterprises of the country onto Mr. Bianco's list. Arbitrarily, let's add the global cost of the First World War ($2.6-trillion in today's currency) and the U.S. costs in the Second World War ($3.6-trillion in today's currency). Total: $9.2-trillion.

These expenditures now exceed U.S. bailout commitments by $500-billion - an amount, incidentally, that would cover the cost of putting a human colony on Mars and of meeting all of the UN's millennium goals (among other things, eradicating extreme poverty from the Earth) by 2015. But the $8.7-trillion, thus far, in meltdown commitments - such as liquidity directed to financial institutions - does not include the stimulus package already approved by Congress - known as the Troubled Asset Relief Program, or TARP - which exceeds $700-billion, or the expenditures that will be approved early in 2009 when president-elect Barack Obama takes over the White House. The Obama team has signalled its intention to enact a stimulus package worth $1-trillion. Combined with the stimulus package already enacted, the combined bailout costs rise to $10.4-trillion ($8.7-trillion in tranquilizers for Wall Street, $1.7-trillion in stimulants for Main Street).

There's yet another global expenditure that helps put the U.S. bailout program in perspective. In his celebrated warning on global warming, British economist Lord Nicholas Stern put the future cost of controlling climate change at $9-trillion - expressed in 2006 dollars, though expended over the next hundred years.

Globe and Mail

Submitted by Fidel on December 31, 2008 - 7:30pm.

Matthias Chang said:

Quote:

Capitalism and Socialism are two sides of the same money-lender’s coin. Both ideologies serve a common master - the global shadow money-lender. . .

WHY WAR IS INEVITABLE

To prove the point, let me use a simple analogy.

It is often reported in the headlines of newspapers that a certain gentleman or woman had been brutally beaten up for failing to pay the debts due to a money-lender. In Malaysia, money-lenders are often referred to as “Ah-Longs”. This is even the case when the debt is paltry. If the money-lender adopts the “soft method” in recovering a loan, it may encourage defaults and non-payments. Brutality ensures full compliance!

Submitted by NorthReport on January 5, 2009 - 1:56pm.

It's not just the USA car folks.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=anBvpiHR18LE

Honda Says U.S. December Sales Declined 35% as Industry Plunged

Submitted by NorthReport on January 5, 2009 - 11:56pm.

We are in for such a financial shit-kicking that most of us have never ever seen anything like it before in our lifetime.

Car dealers in Canada are so desperate that they are now offering to cancel your car purchase if you lose your job. Wait a bit longer and you will be able to buy cars and houses at 1/2 the price they once were, as they are so overpriced compared to people's wages people can no longer afford to buy them.

http://www.doctorhousingbubble.com/japanese-asset-bubble-lessons-from-the-economic-asset-bubble-of-japan-the-heisei-boom-what-parallels-exist-between-the-japanese-asset-bubble-and-our-current-financial-environment/

Japanese Asset Bubble: Lessons from the Economic Asset Bubble of Japan, The Heisei Boom. What parallels exist between the Japanese asset bubble and our current financial environment? [123]

Submitted by George Victor on January 6, 2009 - 4:00am.

North Report

"Car dealers in Canada are so desperate that they are now offering to cancel your car purchase if you lose your job. Wait a bit longer and you will be able to buy cars and houses at 1/2 the price they once were, as they are so overpriced compared to people's wages people can no longer afford to buy them. "

---------------------------------------------------------------------------

A great many people have not been able to afford houses and cars and vacations and a great many items for years now, but credit made it all possible. And the credit balloon ("leveraging") put all out on a limb, which has now broken.

But if deflation becomes as marked at you suggest, NR, we are indeed in for a shit-kicking.

With the Canadian bankers now suggesting a drop in growth to a negative 1.4 to 1.8 per cent, this year, and rising into the black again in 2010, you are certainly not among the optimists. But, then, they may only be saying what the chicken entrails tell them at this point.

And, sign of changing thinking - an apologetic federal government has established a non-taxable savings account, now in effect. The bastards know where they went wrong. Between the mid-80s and the present, savings on income went from 18 per cent to a negative figure thanks to all those daily offers of plastic. Now "they" (our economic peers) are afraid there'll be only poverty in the golden years. And, of course, this pathetic savings venture (for those with any left over) is only to indicate that they are doing something.

But if nobody is buying now, your prognostication could indeed come true, NR.

Submitted by NorthReport on January 6, 2009 - 12:27pm.

Same thing as jumping out of tall buildings when money becomes your God let the suicides begin.

http://www.bloomberg.com/apps/news?pid=20601087&sid=awZEP3g3Ggnk&refer=home

Submitted by josh on January 6, 2009 - 3:18pm.

Fall of the Celtic Tiger part II. Another casualty of neo-liberal economics.

"Everything, it seems, has grown worse here. The recession started earlier and its bite has been deeper. Housing prices have fallen by as much as 50 percent. Bank shares have plummeted by more than 90 percent. Unemployment is approaching 10 percent.

The roots of Ireland’s fall date to more than 20 years ago, when a clutch of economists, politicians and civil servants put their heads together in this very pub and planted the philosophical seeds for the Irish economic miracle.

Known widely as the “Doheny & Nesbitt School of Economics,” these beery musings soon became government policy that chopped taxes in half, sharply reduced import duties and embraced foreign investment — a radical transformation that gave birth to the Celtic Tiger and perhaps the most open and vibrant economy in Europe.

. . . .

"We have repeatedly warned that the government’s housing policy was extremely dangerous,” said John Fitz Gerald, an economist at the Economic and Social Research Institute, a leading policy center in Dublin, who has long urged that the government stanch housing demand by raising taxes. “You will now see unemployment going to 10 percent and we will experience a sharp drop in output.”

He shakes his head and sighs: “This was predictable, but the government just did not deal with it.”"

http://www.nytimes.com/2009/01/04/business/worldbusiness/04ireland.html?em

Submitted by Michelle on January 6, 2009 - 9:43pm.

Long thread.

The World Financial Crisis

Comments