The World Financial Crisis

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Frustrated Mess Frustrated Mess's picture


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.

Bubbles

"$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.

Fidel

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.

Frustrated Mess Frustrated Mess's picture

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

Fidel

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

M. Spector M. Spector's picture

[url=John">http://links.org.au/node/794][u]John Bellamy Foster speaks on "The Great Financial Crisis: Causes and Consequences" (video)[/url]

 

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Fidel

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. . .

M. Spector M. Spector's picture

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.

[url=Monthly">http://www.monthlyreview.org/081201foster-magdoff.php][u]Monthly Review[/url]

 

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martin dufresne

Fascinating summary, thanks!

M. Spector M. Spector's picture

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.

[url=http://www.ft.com/cms/s/0/96a7c1d2-cba0-11dd-ba02-000077b07658.html]Fina... Times[/url], Dec. 16, 2008

 

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M. Spector M. Spector's picture

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.
[url=Henry">http://www.atimes.com/atimes/Global_Economy/JI05Dj03.html][u]Henry C K Liu[/url]

 

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M. Spector M. Spector's picture
Fidel
M. Spector M. Spector's picture

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'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.

[url=Washington">http://www.washingtonpost.com/wp-dyn/content/article/2008/12/21/AR200812... Post[/url]

 

 

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Toby Fourre

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? 

Fidel

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?  Or is it that the inmates are running the asylum? 
 

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" -- -- 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.

 

 

M. Spector M. Spector's picture

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.

[url=Wikipedia[/url]">http://en.wikipedia.org/wiki/Subprime_mortgage_crisis]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.

 

 

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Fidel

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.

M. Spector M. Spector's picture

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.

[url=Source[/url]">http://links.org.au/node/770]Source[/url]

 

 

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SwimmingLee

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.

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

M. Spector M. Spector's picture

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. 

 

 

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Doug

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

 

 

Fidel

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

Doug

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.

M. Spector M. Spector's picture

Walden Bello on [url="Global">http://www.fpif.org/fpiftxt/5765][u]"Global Social Democracy"[/url]

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.

 

 

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Fidel

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.

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500_Apples

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

Doug

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?ncli... 

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

Fidel

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, 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. ?

M. Spector M. Spector's picture

[url=Capitalism">http://mrzine.monthlyreview.org/wolff141208.html][u]Capitalism's Crisis Through a Marxian Lens[/url]

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

- - -  

[url=Another">http://www.wsws.org/media/nb-lecture-1208.pdf][u]Another Marxist analysis[/url] (15 pp., .pdf)

 

 

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Doug

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

Fidel

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. . .

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Doug

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

Fidel

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. 

Doug

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_execut...

Frustrated Mess Frustrated Mess's picture

Quote:
Lehman Brothers Holdings Inc's
(LEHMQ.PK: Quote, Profile, Research) 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

LeighT

"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

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

Doug

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

Ward

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!

 

 

Frustrated Mess Frustrated Mess's picture

Uh, huh.

Fidel
Doug

 

 I knew that Max Factor was responsible!

Fidel
M. Spector M. Spector's picture

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.

[url=http://business.theglobeandmail.com/servlet/story/RTGAM.20081230.wreynol... and Mail[/url]

 

 

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Fidel

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!

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NorthReport

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

NorthReport

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? 

 

 

George Victor

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.

 

 

NorthReport

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

josh

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

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