The World Financial Crisis

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M. Spector M. Spector's picture
The World Financial Crisis

[url= from THIS THREAD[/url]

To this day there is no consensus among economists as to what caused the severe depression that lasted from 1929 to 1939. Was it the stock market crash in 1929 that brought about the Great Depression? Was it the subsequent banking panics and monetary contraction? Perhaps it was the reduction in international lending and protectionist policies pursued by the US—such as the Smoot-Hawley Tariff Act—that caused the Great Depression. Or perhaps the “great contraction,” as Milton Friedman used to call it, was caused by the actions of the Federal Reserve, which allowed a decline in the money supply partly to preserve the gold standard. All such explanations are, of course, ad hoc.  

[b]The fact of the matter is that the economic “brains” of the 1920s, the so-called experts, could neither foresee the coming disaster nor, once it was under way, could predict correctly its magnitude and duration….[/b]

Why were the experts so wrong? [b]They were wrong mostly because economics is an underdeveloped discipline dominated by pure, unabashed ideology.[/b] The dominant school of economic thought during the Great Depression was, and remains to this day, the “neoclassical” or marginalist school. But in the “neoclassical” world there is no such thing as a crisis. This is not the real world in which we live. It is a classless world, consisting of “consumers” and “producers.” It is a harmonious world modeled mostly after mathematical physics. In such a world there is no history; there is no past, no present and no future. Nothing of consequence ever happens in this world, especially no catastrophic event. [b]This unreal, insipid and a-historical marginalist world should have been abandoned a long time ago, particularly after the Great Depression. Yet, its seemingly mathematical elegance combined with its unadulterated and brazen defense of capitalism, or “free market” as its proponents prefer to call it, has kept it alive.[/b] Of course, since the Great Depression the “neoclassical” theory has been somewhat amended by a few ideas from the British aristocrat John Maynard Keynes, ideas that tried to add some elements of reality to the unreal theory. But the result, the [b]so-called “neoclassical synthesis” or “neo-Keynesianism,” is no more than a hodgepodge of disjointed, unclear and incoherent ideas that are fed to the students of economic theory under the rubric of “micro” and “macroeconomics.”[/b]  

This sad state of affairs does not allow much intelligent analysis of the past or present.  It also does not allow one to forecast the future, particularly crises….

Among other things, the 2008 financial woes have been attributed to mortgaged backed securities, particularly those associated with subprime mortgages; the housing bubble, which was made worse by predatory, risky and careless lending; exotic financial instruments or derivatives that were allegedly devised by some wunderkind mathematician or physicist on Wall Street, for example, credit default swaps; the events of September 11, 2001, the subsequent US invasion of Iraq and increase in oil prices; irrational exuberance in the stock market followed by a bear market; the Federal Reserve’s repeated reduction in the discount rate and targeted fed funds rate in 2001-2003, the wrongheadedness of the chairman of the Federal Reserve, Mr. Alan Greespan, who recently found himself in a “state of shocked disbelief” to learn that “the self-interest of lending institutions” might not “protect shareholders’ equity”; deregulation of the banking industry, particularly the Financial Services Modernization Act of 1999 or Gramm-Leach-Bliley Act; liquidity problems in general; lack of confidence in the financial system and the credit market, etc. 

While each of these “causal” explanations, or a combination of them, might have some merit and need to be explored further, they are mostly after-the-fact explanations.  None of the economists who are popping up in the media today explaining what caused the economic woes of 2008 was able to forecast the crisis a year or two earlier….

Financial panics and severe economic downturns are nothing new in a capitalist economy. The history of this economic system, since at least the age of classical political economy, shows that monetary crises and “gluts” occur relatively frequently. This is expected. [b]An economy in which goods are produced not for use but for profit is bound to have gluts now and then. Moreover, in an economic system where acquisitive behavior is considered to be virtuous and greed is said to be good one should expect the relentless creation of new and exotic financial instruments by those on the Wall Street—and, prior to that, on Lombard Street—to swindle one another. One should also expect to see the persistent and ingenious attempts by the money-lenders and the industrialists to prevent new regulations and circumvent the existing ones. Furthermore, in an economy where the livelihood of the masses depends on the whims and wishes of captains of the industry or the financiers, one should expect the masses to be called upon to “bailout” the same tycoons when they are pinched.[/b] Such measures, as President Bush said in his October 14, 2008, discussion of the economy, are “not intended to take over the free market, but to preserve it.” These are all expected. What is not expected is our ability to predict exactly when this slumbering beast wakes up, shakes off and lashes out. We do not have the theoretical edifice to allow such forecasting. Those who with great confidence explain the causes of the current crises, as well as those who, post mortem, explained with remarkable certainty the causes of the Great Depression, are probably the ones who least understand the nature of the beast.

 [url=]Sasan Fayazmanesh is Professor of Economics at California State University, Fresno[/url]


I found that link.

NYTimes Article

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


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


Ghosts of 1933 summit haunt Washington talks

G20 urged to avoid errors that deepened Depression


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. . .

M. Spector M. Spector's picture

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. - [url=]LRB[/url][/quote]


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 


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.




Catchfire Catchfire's picture

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:

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.


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


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.


M. Spector M. Spector's picture

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 [url=][u]previous thread[/u][/url]:

[b]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.[/b] 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….


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.


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.


So much for the free market:

 Thou shalt not foreclose!

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

Fannie Mae and Freddie Mac, the
mortgage-finance companies seized by the U.S. government, will
suspend foreclosures 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, 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.”



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

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

November 20, 2008 "Information Clearinghouse" -- - "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."


DrConway wrote:
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.
You wouldn't call Bretton Woods comprehensive enough?

remind remind's picture

And JB leaves no "stone" unturned.

"watching the tide roll away"


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.

M. Spector M. Spector's picture

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. [b]Ford had recognized a fundamental fatal defect of capitalism:[/b]

[i]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.[/i]

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:

[i]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.[/i]

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. [b]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.[/b] 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.

- [url= Page[/u][/url]

M. Spector M. Spector's picture

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 [b]Timothy Geithner would be appointed Obama's Treasury Secretary.[/b]

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. [b]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.[/b]  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. [b]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.[/b]

- [url=][u]Mike Whitney[/u][/url]



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

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)


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."



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:

'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.




Causes and solutions to the global financial crisis

>by Henri M Sader 

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.

M. Spector M. Spector's picture

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.


M. Spector wrote:
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.

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.

M. Spector M. Spector's picture

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

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. [b]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.[/b]

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.

[url=][u]John Conway[/u][/url]


Spector and Fidel, thank you for all the links.

M. Spector M. Spector's picture

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. 


M. Spector wrote:

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. 

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.

M. Spector M. Spector's picture

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.

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".

"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."



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" 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?


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. 



Thanks Doug. It doesnt sound good.

Breakdown of the Global Monetary System by summer 2009

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.


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

"The first 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

 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. 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ Website Created by Injured LASIK Patients

M. Spector M. Spector's picture

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.


M. Spector wrote:

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.

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?

M. Spector M. Spector's picture

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 [i][b]opposite[/b][/i] 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 [url=][u]there is no alternative[/u][/url]™ 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.


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.

M. Spector M. Spector's picture

Fidel wrote:

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.

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 [b]carry the Liberal Party line on all issues[/b]. 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.


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.


I said that again

M. Spector M. Spector's picture

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

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.

[url=][u]Peter Morici[/u][/url] 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.


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

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?


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


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. 


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.


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."


Capitalist Fools

> by Prof. Joseph E. Stiglitz


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.

M. Spector M. Spector's picture

[url= yourselves for the first wave of the tsunami, as the US auto giants start filing for bankruptcy...[/url]

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?


No Big 3 bankruptcies just yet.


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