"The Federal Reserve is a key mechanism for perpetuating this whole filthy system, in which "Wall Street rules."
After Lehman's Collapse: A Decade of Delay
Now that the 2018 midterms are over, folks can address the elephant in the room. If one tuned into Fox Business midday on January 7, one heard legendary corporate raider Carl Icahn dilate on the dimensions of the pachyderm, which he pegged at $250 trillion. That’s the size of worldwide debt. But can that be right -- it’s more than eleven times the official U.S. federal government’s debt? And in case you didn’t notice, it is a quarter of one quadrillion bucks. Pretty soon we’ll be talking real money.
Icahn’s $250T quotation for worldwide debt came out last year. On September 13, Bloomberg ran “$250 Trillion in Debt: the World’s Post-Lehman Legacy” by Brian Chappatta, who draws off data from the Institute of International Finance’s July 9 “Global Debt Monitor,” (to read IIF reports, one must sign up). Chappatta wonders how the world’s central bankers can “even pretend to know how to reverse what they’ve done over the past decade”:
[Central banks] kept interest rates at or below zero for an extended period […] and used bond-buying programs to further suppress sovereign yields, punishing savers and promoting consumption and risk-taking. Global debt has ballooned over the past two decades: from $84 trillion at the turn of the century, to $173 trillion at the time of the 2008 financial crisis, to $250 trillion a decade after Lehman Brothers Holdings Inc.’s collapse.
Chappatta breaks global debt down into four categories: financial corporations, nonfinancial corporations, households, and governments. In every category, global nominal debt rose from 2008 to 2018, with the debt of governments hitting $67T. In the important debt-as-a-percentage-of-gross-domestic-product measurement, three of the categories rose while only financial corporations fell, “leaving their debt-to-GDP ratio as low as it has been in recent memory.” Global banks seem to be “healthier and more resilient to another shock.” After reporting on worldwide debt, Chappatta then looks at U.S. debt.
What’s interesting about debt in America is that as a percentage of GDP, households and financial corporations have sharply reduced their debt. It is only government in America that has seen a sharp debt-to-GDP uptick, and it was quoted at more than 100 percent of GDP. That’s rather higher than for all government debt worldwide.
Besides the massive racking up of debt over the last decade there’s something else that should concern us: the massive creation of new money. One of the ways money is created is when central banks engage in the “bond-buying programs” that Chappatta refers to. We call such programs “quantitative easing.” When the Federal Reserve buys assets, like treasuries and mortgage-backed securities, it needs money. So the Fed just creates the money ex nihilo.
Since the U.S. isn’t the only nation that has been busy buying bonds and creating money, one might wonder just how much money there is in the world. In June of 2017,HowMuch put out “Putting the World’s Money into Perspective,” which is a nice little graphic that puts the category “All Money” at $83.6T.
In November of 2017, MarketWatch ran “Here’s all the money in the world, in one chart” by Sue Chang, who in her short intro to the chart has some interesting things to say about global money, including cryptocurrencies. She writes of “narrow money” and “broad money” and pegs the latter at $90.4T, (or what Sen. Everett Dirksen would call “real money”.) If you want to examine Chang’s chart more closely, I’ve “excised” it here for your convenience; don’t miss the notes on the right margin. (Because its depth is 13,895 pixels, you might want to just save the chart to your computer rather than print it off.)
So, in addition to an historic run-up in debt, there’s been a monster amount of new money created. Chappatta calls it the “grandest central-bank experiment in history.” His use of “experiment” is apropos, as one wonders whether the world’s central bankers and their economists really know what they’ve been doing.
One ray of hope might just be President Trump’s choice of Jerome Powell as Chairman of the Federal Reserve, (Trump has such good instincts about people). One can get a sense of the man from his January talk with David Rubenstein at the Economic Club of Washington, D.C. (video and transcript). It’s refreshing that Mr. Powell disdains the “Fed speak” used by his predecessors.
Chappatta’s article is quite worth reading, and it’s not very long. The charts are user-friendly, although animated ones are a bit “creative.” The last section, “China Charges Forward,” is especially worthwhile.
This is the post-Lehman legacy. To pull the global economy back from the brink, governments borrowed heavily from the future. That either portends pain ahead, through austerity measures or tax increases, or it signals that central-bank meddling will become a permanent fixture of 21st century financial markets.
Given those alternatives, let’s try a little austerity. But austerity would entail spending cuts, and Congress has a poor history in that regard. In fact, since fiscal 2007, the year before the financial crisis, total federal spending has gone from $2.72T a year to more than $4T. While austere citizens deleverage and get their fiscal affairs in order, Congress shamefully borrows and spends like never before.
Congress’ solutions are to bail out, prop up, and do whatever it takes to avoid reforming what it has created. So they farm out their responsibilities to the Federal Reserve. Indeed, in the July 17, 2012 meeting of the Senate Banking Committee (go to the 53:50 point of this C-SPAN video), Chuck Schumer told Federal Reserve Chairman Ben Bernanke the following:
So given the political realities, Mr. Chairman, particularly in this election year, I'm afraid the Fed is the only game in town. And I would urge you to take whatever actions you think would be most helpful in supporting a stronger economic recovery… So get to work, Mr. Chairman. (Chuckles.)
So the Fed is “the only game in town” because there are only monetary solutions for the economy, right? There aren’t any fiscal solutions, as they would involve Congress, and Congress is busy running for re-election, right? Sounds like you’re abdicating your responsibilities, Chuck.
The last decade has been an exercise in delay. Congress has avoided doing the difficult and unpopular things that would help avoid future financial collapses. If Congress were serious about balancing the budget, then social programs would be on the chopping block, because that’s where the real money goes.
Jon N. Hall of ULTRACON OPINION is a programmer from Kansas City.
"The Federal Reserve is a key mechanism for perpetuating this
whole filthy system, in which "Wall Street rules."
Wall Street rules
the depression is already here for most of us below the super-rich!
"Overall,
the reaction to the decision points to the underlying fragility of
financial markets, which have become a house of cards as a result of the
massive inflows of money from the Fed and other central banks, and are now
extremely susceptible to even a small tightening in financial
conditions."
Decade after financial crisis
JPMorgan predicts next one’s coming soon
World’s top 5
‘most evil’ corporations
Apple
Apple sued for
deliberately slowing down older iPhones — RT Business News
Nestle
Philip Morris
McDonald's
McDonald’s becomes
weed users’ highest-ranking fast food joint — RT US News
Ten years since the collapse of Lehman
Brothers
15 September 2018
Who Can We Blame For The Great Recession?
"The Federal Reserve is a key mechanism for perpetuating this
whole filthy system, in which "Wall Street rules."
Wall Street rules
The Federal Reserve sent a clear message to Wall Street on
Friday: It will not allow the longest bull market in American history to end.
The message was received loud and clear, and the Dow rose by more than 700
points.
Hundreds of thousands of federal workers remain furloughed or
forced to work without pay as the partial government shutdown enters its third
week, but the US central bank is making clear that all of the resources of the
state are at the disposal of the financial oligarchy.
Responding to Thursday’s market selloff following a dismal
report from Apple and signs of a manufacturing slowdown in both China and the
US, the Fed declared it was “listening” to the markets and would scrap its
plans to raise interest rates.
Speaking at a conference in Atlanta, where he was flanked by his
predecessors Ben Bernanke and Janet Yellen, both of whom had worked to reflate
the stock market bubble after the 2008 financial crash, Chairman Jerome Powell
signaled that the Fed would back off from its two projected rate increases for
2019.
“We’re listening sensitively to the messages markets are
sending,” he said, adding that the central bank would be “patient” in imposing
further rate increases. To underline the point, he declared, “If we ever came
to the conclusion that any aspect of our plans” was causing a problem, “we
wouldn’t hesitate to change it.”
This extraordinary pledge to Wall Street followed the 660 point
plunge in the Dow Jones Industrial Average on Thursday, capping off the worst
two-day start for a new trading year since the collapse of the dot.com bubble.
William McChesney Martin, the Fed chairman from 1951 to 1970,
famously said that his job was “to take away the punch bowl just as the party
gets going.” Now the task of the Fed chairman is to ply the wealthy revelers
with tequila shots as soon as they start to sober up.
Powell’s remarks were particularly striking given that they
followed the release Friday of the most upbeat jobs report in over a year, with
figures, including the highest year-on-year wage growth since the 2008 crisis,
universally lauded as “stellar.”
While US financial markets have endured the worst December since the Great Depression, amid mounting fears of a looming recession and a new financial crisis, analysts have been quick to point out that there are no “hard” signs of a recession in the United States.
Both the Dow and the S&P 500 indexes have fallen more than
15 percent from their recent highs, while the tech-heavy NASDAQ has entered
bear market territory, usually defined as a drop of 20 percent from recent
highs.
The markets, Powell admitted, are “well ahead of the data.” But
it is the markets, not the “data,” that Powell is listening to.
Since World War II, bear markets have occurred, on average,
every five-and-a-half years. But if the present trend continues, the Dow will
reach 10 years without a bear market in March, despite the recent losses.
Now the Fed has stepped in effectively to pledge that it
will allocate whatever resources are needed to ensure that no substantial market correction takes place. But this
means only that when the correction does come, as it
inevitably must, it will be all the more severe and the Fed will have all the less power to stop it.
From the standpoint of the history of the institution, the Fed’s
current more or less explicit role as backstop for the stock market is a
relatively new development. Founded in 1913, the Federal Reserve legally has
had the “dual mandate” of ensuring both maximum employment and price stability
since the late 1970s. Fed officials have traditionally denied being influenced
in policy decisions by a desire to drive up the stock market.
Federal Reserve Chairman Paul Volcker, appointed by Democratic
President Jimmy Carter in 1979, deliberately engineered an economic recession
by driving the benchmark federal funds interest rate above 20 percent. His
highly conscious aim, in the name of combating inflation, was to quash a wages
movement of US workers by triggering plant closures and driving up
unemployment.
The actions of the Fed under Volcker set the stage for a vast
upward redistribution of wealth, facilitated on one hand by the trade unions’
suppression of the class struggle and on the other by a relentless and dizzying
rise on the stock market.
Volcker’s recession, together with the Reagan administration’s
crushing of the 1981 PATCO air traffic controllers’ strike, ushered in decades
of mass layoffs, deindustrialization and wage and benefit concessions, leading
labor’s share of total national income to fall year after year.
These were also decades of financial deregulation, leading to
the savings and loan crisis of the late 1980s, the dot.com bubble of 1999-2000,
and, worst of all, the 2008 financial crisis.
In each of these crises, the Federal Reserve carried out what
became known as the “Greenspan put,” (later the “Bernanke put”)—an implicit
guarantee to backstop the financial markets, prompting investors to take ever
greater risks.
In 2008, this resulted in the most sweeping and systemic
financial crisis since the Great Depression, prompting Fed Chairman Bernanke,
New York Fed President Tim Geithner and Treasury Secretary Henry Paulson (the
former CEO of Goldman Sachs) to orchestrate the largest bank bailout in human
history.
Since that time, the Federal Reserve has carried out its most
accommodative monetary policy ever, keeping interest rates at or near zero
percent for six years. It supplemented this boondoggle for the financial elite
with its multi-trillion-dollar “quantitative easing” money-printing program.
The effect can be seen in the ever more staggering wealth of the
financial oligarchy, which has consistently enjoyed investment returns of
between 10 and 20 percent every year since the financial crisis, even as the
incomes of workers have stagnated or fallen.
American capitalist society is hooked on the toxic growth of
social inequality created by the stock market bubble. This, in turn, fosters
the political framework not just for the decadent lifestyles of the financial
oligarchs, each of whom owns, on average, a half-dozen mansions around the
world, a private jet and a super-yacht, but also for the broader periphery of
the affluent upper-middle class, which provides the oligarchs with political
legitimacy and support. These elite social layers determine American political
life, from which the broad mass of working people is effectively excluded.
The Federal Reserve is a key mechanism for perpetuating this whole filthy system, in
which “Wall Street rules.” But its services in behalf
of the rich and the super-rich only compound the fundamental
and insoluble contradictions of capitalism, plunging the system
into ever deeper debt and ensuring that the next crisis will be
that much more violent and explosive.
In this intensifying crisis, the working class must assert its
independent interests with the same determination and ruthlessness as evinced
by the ruling class. It must answer the bourgeoisie’s social counterrevolution
with the program of socialist revolution.
the depression is already here for most of us below the super-rich!
Trump and
the GOP created a fake economic boom on our collective credit card:
The equivalent of maxing out your credit cards and saying look how
good I'm doing right now.
*
Trump criticized Dimon in
2013 for supposedly contributing to the country’s economic
downturn. “I’m not Jamie Dimon, who pays $13 billion to settle a case
and then pays $11 billion to settle a case and who I think is the worst
banker in the United States,” he told reporters.
*
"One
of the premier institutions of big business, JP Morgan Chase, issued
an internal report on the eve of the 10th anniversary of the 2008
crash, which warned that another “great liquidity crisis”
was possible, and that a government bailout on the scale of that
effected by Bush and Obama will produce social unrest, “in light of
the potential impact of central bank actions in driving
inequality between asset owners and labor."
*
"Overall,
the reaction to the decision points to the underlying fragility of
financial markets, which have become a house of cards as a result of the
massive inflows of money from the Fed and other central banks, and are now
extremely susceptible to even a small tightening in financial
conditions."
*
"It is significant that what the Financial Times described
as a “tsunami of money”—estimated to reach $1 trillion for the year—has failed
to prevent what could be the worst year for stock markets since the global
financial crisis."
*
"A
decade ago, as the financial crisis raged, America’s banks were in
ruins. Lehman Brothers, the storied 158-year-old investment house,
collapsed into bankruptcy in mid-September 2008. Six months earlier, Bear
Stearns, its competitor, had required a government-engineered rescue to
avert the same outcome. By October, two of the nation’s largest commercial
banks, Citigroup and Bank of America, needed their own government-tailored
bailouts to escape failure. Smaller but still-sizable banks, such as
Washington Mutual and IndyMac, died."
*
The GOP said the "Tax Cuts and Jobs Act" would reduce
deficits and supercharge the economy (and stocks and wages). The White
House says things are working as planned, but one year
on--the numbers mostly suggest otherwise.
Decade after financial crisis
JPMorgan predicts next one’s coming soon
Published
time: 13 Sep, 2018 14:00
© Ole Spata
/ Global Look Press
With the 10th anniversary
approaching of the catalyst for the last major global stock market crash – the Lehman
Brothers’ collapse – strategists from JPMorgan are predicting the next
financial crisis to strike in 2020.
Wall Street’s largest
investment bank analyzed the causes of the crash and measures taken by
governments and central banks across the world to stop the crisis in 2008, and
found that the economy remains propped up by those extraordinary steps.
According to the bank’s
analysis, the next crisis will probably be less painful, however, diminished
financial market liquidity since the 2008 implosion is a “wildcard” that’s
tough to game out.
“The main attribute of
the next crisis will be severe liquidity disruptions resulting from these
market developments since the last crisis,” the reports says.
Changes to central bank
policy are seen by JPMorgan analysts as a risk to stocks, which by one measure
have been in the longest bull market in history since the bottom of the crisis.
JPMorgan’s Marko
Kolanovic has previously concluded that the big shift away from actively
managed investing has escalated the danger of market disruptions.
“The shift from active to
passive asset management, and specifically the decline of active value investors,
reduces the ability of the market to prevent and recover from large drawdowns,” said JPMorgan’s
Joyce Chang and Jan Loeys.
The bank estimates that
actively managed accounts make up only about one-third of equity assets under
management, with active single-name trading responsible for just 10 percent or
so of trading volume.
JPMorgan referred to its
hypothetical scenario as the “great liquidity crisis,” claiming
that the timing of when it could occur “will largely be determined by
the pace of central bank normalization, business cycle dynamics, and various
idiosyncratic events such as escalation of trade war waged by the current US
administration.”
World’s top 5
‘most evil’ corporations
Published time: 3 Mar, 2018 05:55Edited time: 3
Mar, 2018 13:04
Jeff Bezos, founder and chief executive officer of Amazon, poses
as he stands atop a supply truck during a photo opportunity at the premises of
a shopping mall in the southern Indian city of Bangalore © Abhishek N.
Chinnappa / Reuters
Most companies become successful thanks to their stellar
reputations. But not always. RT Business scraped the bottom of the barrel to
find the most hated companies trending on the internet.
Monsanto
The company that needs no introduction, creator of DDT and Agent
Orange, Monsanto is one the world’s largest pesticide and GMO seed
manufacturers. It is known for being the first company to genetically modify a
seed to make it resistant to pesticides and herbicides. Monsanto’s herbicides
have been blamed for killing millions of crop acres, while its chemicals were
added to blacklists of products causing cancer and many other health problems.
Apple
Once the darling of Microsoft-hating gadget lovers, Apple more
recently has been accused of mistreating or underpaying their employees, hiding
money offshore, and not paying taxes. It has also been accused of violating
health or environmental legislation, and misusing its position where they have
a monopoly in the market. And, oh yes, deliberately slowing older iPhones and
overcharging for its products to boot.
Apple sued for
deliberately slowing down older iPhones — RT Business News
Nestle
The world's largest food and beverage company Nestle says it is
committed to enhancing quality of life and contributing to a healthier future.
However, it has been dragged through numerous scandals involving slave labor.
The multinational is one of the most boycotted corporations in the world, as
violations of labor rights have been reported at its factories in different
countries.
Philip Morris
The products of the American multinational cigarette and tobacco manufacturing
company are sold in over 180 countries outside the United States. Philip Morris
owns Marlboro, one of the world's biggest brands. Back in 1999, Philip Morris
courted officials of the Czech Republic by explaining how smoking would in fact
help their economy, due to the reduced healthcare costs from its citizens dying
early.
McDonald's
American fast-food company McDonald's was founded in 1940. The
company serves more customers each day than the entire population of Great
Britain, but has a long history of terrible labor practices. It has been
constantly under fire for serving unhealthy junk food, which contributes health
problems. Researchers have found that McDonald’s burgers cannot decompose on
their own.
McDonald’s becomes
weed users’ highest-ranking fast food joint — RT US News
Notable mentions of corporations not quite evil enough to make the
top list:
Goldman Sachs TRUMP CRONIESJPMorgan Chase OBAMA CRONIES
ExxonMobil
Halliburton
British American Tobacco
Dow Chemical
DuPont
Bayer
Microsoft
Google
Facebook
Amazon
Walmart
Ten years since the collapse of Lehman
Brothers
15 September 2018
Ten years ago on this
day, the global capitalist system entered its most far-reaching and devastating
crisis since the Great Depression of the 1930s. A decade later none of the
contradictions which produced the financial crisis has been alleviated, much
less overcome. Moreover, the very policies carried out to prevent a total
meltdown of the financial system, involving the outlay of trillions of dollars
by the US Federal Reserve and other major central banks, have only created the
conditions for an even bigger disaster.
The immediate trigger
for the onset of the crisis was the decision by US financial authorities not to
bail out the 158-year-old investment bank Lehman Brothers and prevent its
bankruptcy. There is considerable evidence to suggest that this was a
deliberate decision by the Federal Reserve to create the necessary conditions
for what they knew would have to be a massive bailout, not just of a series of
banks but the entire financial system.
The previous March, the
Fed had organised a $30 billion rescue of Bear Stearns when it was taken over
by JP Morgan. But as the Fed’s own minutes from that time make clear the Bear
Stearns crisis was just the tip of a huge financial iceberg. The Fed noted that
“given the fragile conditions of the financial markets at the time” and the
“expected contagion” that would result from its demise it was necessary to
organise a bailout. As Fed chairman Ben Bernanke later testified, a sudden
failure would have led to a “chaotic unwinding” of positions in financial
markets. The bailout of Bear Stearns was not a solution but a holding operation
to try to buy time and prepare for what was coming.
While the demise of
Lehman was the initial trigger, the most significant event was the impending
bankruptcy, revealed just two days later, of the American insurance firm AIG,
which was at the centre of a system of complex financial products running into
trillions of dollars.
Due to the
interconnections of the global financial system, the crisis rapidly extended to
financial markets around the world, above all across the Atlantic to Europe where
the banks had been major investors in the arcane financial instruments that had
been developed around the US sub-prime home mortgage market, the collapse of
which provided the immediate trigger for the crisis.
The value of every
crisis, it has been rightly said, is that it reveals and starkly lays bare the
underlying socio-economic and political relations that are concealed in
“normal” times. The collapse of 2008 is no exception.
In the twenty years and
more preceding the crisis, particularly in the aftermath of the liquidation of
the Soviet Union in 1991, the bourgeoisie and its ideologists had proclaimed
not only the superiority of the capitalist “free market” but that it was the
only possible socio-economic form of organisation. Basing themselves on the
false identification of the Stalinist regime with socialism, they maintained
that its liquidation signified that Marxism was forever dead and buried. In
particular, Marx’s analysis of the fundamental and irresolvable contradictions
of the capitalist mode of production had proved to be false. According to the
central foundation for what passed for theoretical analysis, the so-called
“efficient markets hypothesis,” a financial meltdown was impossible because
with the development of advanced technologies all information had been priced
into decision making and so a financial collapse was impossible.
Rarely have the
nostrums of the bourgeoisie and its ideologists been so graphically exposed.
Two days after the
crisis erupted, President George W. Bush declared “this sucker’s going down.”
Later, the high priest of capitalism and its “free market,” the now bewildered
former head of the US Federal Reserve Alan Greenspan, testified to the US
Congress that he had been completely confounded because markets had failed to
behave according to his “model” and its assumptions.
The crisis also exposed
in full glare another of the central myths of the capitalist order—that the
state is somehow a neutral or independent organisation committed to regulating
social and economic affairs in the interests of society as a whole.
It confirmed another
central tenet of Marxism, expounded more than 170 years ago, that “the
executive of the modern state is but a committee for managing the common
affairs of the bourgeoisie.”
This was exemplified in
the naked class response to the financial meltdown. The plans, already
developed by the Fed and other authorities to cover the losses of the financial
elite, whose speculative and in many cases outright criminal activities had
sparked the crisis, were put into operation.
In the lead-up to the
presidential election of November 4, Wall Street swung its support behind
Obama—with the media promoting him as the candidate of “hope” and “change you
can believe in”—over McCain. The Democrats had committed themselves to the
bailout, securing the passage of the $700 billion TARP asset-purchasing program
through Congress. This massive increase in the national debt of the United
States was authorised with virtually no debate.
Of course, a new political
fiction was immediately advanced. It was necessary to bail out Wall Street
first, the public was told, in order to assist Main Street. However, this lie
was rapidly exposed. The crisis was the starting point for a massive assault on
the working class. While bankers and financial speculators continued to receive
their bonuses, millions of American families lost their homes. Tens of millions
were made unemployed.
In the following year,
the rescue operation organised by the Obama administration of Chrysler and
General Motors, with the active and full collaboration of the United Auto
Workers union, resulted in the development of new forms of exploitation, above
all through the two-tier wages system, paving the way for even more brutal
systems such as those pioneered by Amazon.
This was the other side
of a Wall Street bailout—a massive restructuring of class relations in line
with the edict of Obama’s one-time chief of staff Rahm Emanuel to “never let a
serious crisis go to waste” because it provides “an opportunity to do things
you think you could not do before.”
The same class response
was in evidence elsewhere. After the initial effects of the crisis had been
overcome, the European bourgeoisie initiated an austerity drive forcing up
youth unemployment to record levels. In Britain workers have endured a
sustained decline in real wages not seen in more than a century.
The most egregious
expression of this class logic has been seen in Greece with the imposition of
poverty levels last seen in the Great Depression of the 1930s. The numerous
bailout operations were never aimed at “rescuing” the Greek economy and its
population but directed to extracting the resources to repay the major banks
and financial institutions.
The crisis revealed the
real nature of bourgeois democracy. The euro zone and the European Union were
exposed as nothing more than a mechanism for the dictatorship of European
finance capital. As one of the chief enforcers of its diktats, the former
German finance minister Wolfgang Schäuble, declared, in the face of popular
opposition, “elections cannot be allowed to change economic policy.”
As the working class in
every country confronts stagnant and declining wages, falling living standards,
the scrapping of secure employment and attacks on social services, leading to
mounting health and other problems, innumerable reports and data chart the
development of a global system in which wealth is siphoned up the income scale.
According to the latest
Wealth-X World Ultra Wealth Report some 255,810 “ultra-high net worth”
individuals, with a minimum of $30 million in wealth, now collectively own
$31.5 trillion, more than the bottom 80 percent of the world’s
population—comprising 5.6 billion people. Overall the wealth of this cohort
increased by 16.3 percent in 2016–17, rising by 13.1 percent in North America,
13.5 percent in Europe and 26.7 percent in Asia.
The full significance
of the bailouts of the financial system and the subsequent provision of
trillions of dollars is clear. It has brought about the institutionalisation of
a process, developing over the preceding decades, where the financial system,
with the stock market at its centre, functions as a mechanism for the transfer
of wealth to the heights of society.
In its analysis of the
financial crisis, the World Socialist Web Site insisted from
the outset that this was not a conjunctural development, from which there would
be a “recovery,” but a breakdown of the entire capitalist mode of production.
That analysis has been
completely confirmed. While a total financial meltdown was prevented, the
diseases of the profit system that gave rise to the crisis have not been
overcome. Rather, they have metastasised and mutated into new and even more
malignant forms.
The actions of the US
Federal Reserve and other major central banks in pumping trillions of dollars
into the financial system in order to “rescue” it, and to enable the
continuation of the very forms of speculation that led to the crisis, have only
created the conditions for a new disaster in which the central banks themselves
will be directly involved.
This fact of economic
and financial life can even be seen in the comments by bourgeois analysts and
pundits on the occasion of the upcoming anniversary. While they generally
maintain that the financial system has been “strengthened” since 2008—a
completely worthless assertion given that it was held to be strong in the lead
up to the crash and any warnings of growing risks were dismissed as “Luddite”
by such luminaries as former US Treasury Secretary Lawrence Summers—no one
dares to proclaim that the underlying problems have been resolved.
Rather, taking heed
from the warning of JP Morgan chief Jamie Dimon that while the trigger for the
next crisis will not be the same as the last but “there will be another
crisis”, they nervously scan the horizon for signs of where it might strike.
Some analysts point to
the rise in global debt, which is now running at 217 percent of gross domestic
product, an increase of 40 percentage points since 2007, contrary to all expectations
that, since debt was a major cause of the 2008 crisis, some deleveraging would
have occurred.
Others single out the
mounting problems in so-called emerging markets facing repayments on
dollar-denominated loans, a source of speculation when interest rates were at
record lows but which now present major refinancing problems as interest rates
have started to rise.
The seemingly
unstoppable rise of stock markets, fuelled by the provision of ultra-cheap
money by the Fed and other central banks, is also an issue of concern. The
increased use of passive investment funds tied to global indexes via computer
trading systems tends to reinforce downswings as has been seen in a series of
“flash crashes” such as that of last February when Wall Street fell by as much
as 1,600 points in intraday trading.
The greatest source of
anxiety, although it is not mentioned so much publicly, is the resurgence of
the working class and the push for increased wages. To the extent it is
discussed publicly, this fear, manifested in stock market falls generated by
news of relatively small wage increases, is generally couched in terms of
“political tensions” caused by increased social inequality.
A further expression of
the ongoing and deepening breakdown of the capitalist order is the
disintegration of all the geo-political structures and relationships that have
constituted the framework within which the movements of capitalist economy and
finance have flowed throughout the post-war period.
In the wake of the 2008
crisis, the leaders of the G20 gathered in April 2009, in the midst of a
collapse in world trade taking place at a faster rate than in 1930. They
pledged to never again go down the road of the protectionist tariff policies
that had played such a disastrous role in the Great Depression and had worked
to create the conditions for the outbreak of World War II, just ten years after
the Wall Street crash of October 1929.
That commitment lies in
tatters as the Trump administration, seeking to counter the economic decline of
the US so graphically revealed in the 2008 collapse, embarks on ever widening
trade war measures.
The principal target,
at least to this point, is China. But the Trump administration has designated
the European Union as an economic “foe,” and has already implemented trade war
measures against it, with more in the pipeline.
The G7, the grouping of
major capitalist powers set up in the wake of the world recession of 1974–75
and the end of the post-war boom to try to regulate the affairs of world
capitalism, exists in name only following the acrimonious split at its meeting
last June with the US decision to impose tariffs against its nominal “strategic
allies.”
World war has not yet
broken out. But there are innumerable flashpoints—in the Middle East, in
Eastern Europe, in North East Asia and in the South China Sea to cite just some
examples—where a conflict could erupt between nuclear-armed powers. The impetus
for a new global conflagration is the drive by US imperialism to counter its
economic decline by asserting its dominance over the Eurasian landmass at the
expense of its enemies and allies alike.
It is of enormous
significance that the civil war that has erupted in the American state
apparatus between the state and military-intelligence apparatus, whose
mouthpiece is the Democratic Party, and the Trump administration is over how
this objective should be accomplished; that is, whether the American drive
should be directed in the first instance against Russia or China. At the same
time, all the major powers are boosting their military budgets in preparation
for the escalation of military conflicts.
The political system in
every country is beset by deep crisis. The very rapidity of the crisis is
accentuating the contradictions between the objective dangers and the level of
class consciousness. The chief obstacle to achieving the necessary alignment of
working class consciousness with the objective reality of capitalist crisis on
a world scale remains the reactionary political role of the old bureaucratised
labour and trade union organisations, abetted by the various pseudo-left
tendencies, in suppressing the class struggle. But the conditions are
developing for these shackles to be broken.
In the founding program
of the Fourth International, Leon Trotsky wrote: “The orientation of the mass
is determined first by the objective conditions of decaying capitalism, and
second, by the treacherous policies of the old workers’ organisations. Of these
factors, the first, of course, is the decisive one: the laws of history are
stronger than the bureaucratic apparatus.”
That perspective is now
being confirmed in the resurgence of the class struggle internationally, above
all in the centre of world capitalism, the United States.
Conscious of their
profound weakness in the face of such a movement, and fully aware of its
revolutionary implications, the ruling classes in every country have been
developing ever-more authoritarian forms of rule.
Their greatest fear is
the development of political consciousness, that is, the understanding in wider
sections of the working class, and above all the youth, of its real situation, that
its enemy is the entire capitalist system. Above all, the ruling elites fear
the development of a revolutionary socialist movement, based on the principles
and program of the Fourth International. This is why the World
Socialist Web Site is the central target of internet censorship. It
is also the reason for the escalation of attacks by the German coalition
government on the Sozialistische Gleichheitspartei, the German section of the
International Committee of the Fourth International (ICFI).
But the efforts to
suppress the work of the International Committee will fail. The renewal of
class struggle will provide new forces for the development of the working of
the ICFI throughout the world.
The meltdown of 2008
demonstrated above all that the working class confronts a global crisis. The
crisis can therefore be resolved only on a global scale through the unification
of the working class across national borders and barriers on the basis of an
international socialist program for the reconstruction of society to meet human
need and not profit.
Nick Beams
Who Can We Blame For The Great Recession?
|
This year
marks the tenth anniversary of the “Great Recession” and the media are trying
to determine if we have learned anything from it. The Queen visited the London
School of Economics after the “Great Recession” to ask her chief economists why
they hadn’t seen this disaster coming. They told her they would get back to her
with an answer. Later, they wrote her a letter saying that the best
economic theory asserts that recessions are random events and they had
successfully predicted that no one can predict recessions.
Still,
George Packer, a staff writer at the New Yorker magazine since 2003, thinks he
knows more than the LSE academics. He wrote the following in the August 27 print issue:
"It was caused by reckless lending practices, Wall Street greed,
outright fraud, lax government oversight in the George W. Bush years, and
deregulation of the financial sector in the Bill Clinton years. The deepest
source, going back decades, was rising inequality. In good times and bad, no
matter which party held power, the squeezed middle class sank ever further into
debt...
"In February, 2009, with the
economy losing seven hundred thousand jobs a month, Congress passed a stimulus
bill—a nearly trillion-dollar package of tax cuts, aid to states, and
infrastructure spending, considered essential by economists of every
persuasion—with the support of just three Republican senators and not a single
Republican member of the House."
Typically,
journalists will defer to an expert on matters in which they aren’t trained,
which is most subjects. But Packer didn’t bother to ask an economist as the
Queen did. Had he done so, he would have received the same answer from
mainstream economists – recessions are random events and can’t be predicted. If
economists knew the causes of recessions they could predict them when they see
the causes present.
So where
did Packer get his “causes” for the latest recession? In the classic movie
Casablanca, the corrupt and lazy policeman Renault is “shocked” to find
gambling going on at Rick’s place and orders the others to round up the “usual
suspects.” That’s what Packer does. People have blamed greedy businessmen and
bankers for crises for centuries. Since the rise of socialism they added capitalism
and the politicians who support it. The only new suspect in the socialist line
up is inequality, even though inequality has varied little since 1900 and is
near its record low since then.
Had
Packer consulted the University of Chicago Booth School of Business, he
wouldn’t have received much help. Keep in mind that mainstream economists think
recessions are random events. After the storm subsides, they can identify
likely contributors for the latest disaster, but those differ with each
recession. Recently Chicago Booth queried experts for the top contributing
factors of the latest recession. The top answer was flawed regulations,
followed by underestimating risk and mortgage fraud.
The
“flawed regulations” excuse assumes that bitter bureaucrats who write the regulations
are wiser than the actual bankers and ignores the fact that banking is one of
the most regulated industries. One analyst described the recent recession as
the perfect storm of regulations so massive no one group could understand them
all and many of them working against other regulations.
Blaming
“underestimated risk” is good Monday morning quarterbacking. Everyone has 20/20
hindsight, or 50/50 as quarterback Cam Newton said. The same economists don’t
explain why banks that took similar risks didn’t fail or why what seems risky
now didn’t seem so risky in 2007. As for fraud, the amount was negligible and
is always there; why did it contribute to a recession this time? Sadly, the
correct answer to what caused the Great Recession– “Loose monetary policy” –
came in next to last among Chicago Booth’s experts.
Perspective
is vital. A magnifying glass can make a lady bug look terrifying. Let’s pull
back and put the latest recession in a broader context. There have been 47
recessions/depressions since the birth of the nation. Before the Great
Depression economists called crises “depressions” and since then they are
“recessions.” They’re the same thing; economists thought “recession” was less
scary.
Recessions
before the Great Depression were mild compared to it. It took the Federal
Reserve and the US government working together trying to “rescue” us to plunge
the country into history’s worst economic disaster. Journalists like Packer
have convinced people that the Great Recession of 2008 was second only to the
Great Depression, but if we combine the recessions of 1981 and 1982, separated
only by a technicality and six months, that recession would have been worse.
The Fed did not reduce interest rates after that recession because it was still
battling the inflation it has caused in the 1970s, yet the economy bounced back
and recovery lasted almost a decade.
I want to
drive home the fact that the three worst recessions in our history assaulted us
after the creation of the Federal Reserve in 1913.
The best
explanation of the causes of recessions, because it enjoys the greatest
empirical support, is the Austrian business-cycle theory, or ABCT. Ludwig von
Mises and Friedrich Hayek are most famous for refining and expounding it, but
the English economists of the Manchester school were the first to write about
it. They discovered that expansions of the money supply through low interest
rates motivated businesses to borrow and invest at a rapid rate. That launches
an unsustainable boom because businesses are trying to deploy more capital
goods than exist. Banks raise rates to rein in galloping inflation and the boom
turns to dust.
Banks
don’t control interest rates today as they did in the past. That’s the Federal
Reserve’s job. The Fed generally reduces interest rates or expands the money
supply through “quantitative easing,” or buying bonds from banks, in order to
force an economy in the ditch to climb out. The recovery from the Great Recession remained on its feet for so long
because the Fed’s policy of paying interest on reserves at banks soaked up much
of the new money it created out of thin air. Also, much of the money went
overseas to buy imports or as investments.
The
lesson – don’t ask medical advice from your plumber or economics from a
journalist. And if you ask an economist, make sure he follows the Austrian
school.
NO PRESIDENT IN HISTORY SUCKED IN MORE BRIBES FROM CRIMINAL BANKSTERS
THAN BARACK OBAMA!
“Records show that four out of Obama's top
five contributors are employees of
financial
industry giants - Goldman Sachs
($571,330),
UBS AG ($364,806), JPMorgan Chase
($362,207) and Citigroup ($358,054).”
OBAMA and HIS BANKS: THEIR PROFITS, CRIMES and LOOTING
SOAR
This
was not because of difficulties in securing indictments or convictions. On the
contrary, Attorney General Eric Holder told a Senate committee in March of 2013
that the Obama administration chose not to prosecute the big banks or their
CEOs because to do so might “have a negative impact on the national economy.”
BANKSTERS’ RENT BOY FORMER ATTORNEY GEN ERIC HOLDER POSES WITH HITLER
PRAISING LEADER OF RACIST, HOMOPHOBIC,
ANTI-SEMITIC HATE MONGER LOUIS Farrakhan.
“Attorney General Eric Holder's
tenure was a low point even within the disgraceful scandal-ridden Obama years.”
DANIEL GREENFIELD / FRONTPAGE MAG
Why the swamp has little to fear
By Rick Hayes
The midterm elections will either
halt or hasten the current soft coup whose aim is to overthrow a legally
elected President now being conducted by the swamp. And if the
history of Washington, D.C. corruption is any indication of what will happen
after the midterms, the swamp will survive regardless of its coup's success or
failure. But the efforts to expose the treasonous plot will fade
away into the dustbin of political history after being seen as just another
waste of time and taxpayer money. The seemingly endless parade of
corruption scandals and mind-numbing criminal activity will go on unabated and
continue to escalate to unimaginable heights because of an inescapable fact of
human nature.
In a Forbes 2015
article entitled "The Big Bank Bailout," author Mike Collins mentions
several ways to prevent another housing bubble crisis from destroying the world
economy when he writes, "But perhaps the best solution is to make the CEOs
and top managers of the banks criminally liable for breaking these rules so
that they fear going to jail. These people are not afraid to do it
again so if you can’t put some real fear in their heads, they will do it
again."
What Collins has honed
in on is accountability and punishment, the very things lacking in today's
dealings with the swamp. Just as the major banking institutions will
soon, if not already, re-enter into risky, corrupt, and illegal lending
practices because there was not a "smidgen" of accountability for the
trillions of dollars they lost in the housing bubble catastrophe, so too will
the past and presently unknown criminals within the IRS, FBI, and DOJ continue
to thumb their noses at the law.
What the American people have been
subjected to over the past 18 months since President Trump took office is a
series of crimes that have been painstakingly unearthed but little
else. "Earth-shattering," "bombshell," and "constitutional
crisis" are just some of the words and phrases used by media outlets to
describe the newest update regarding the many ongoing
investigations. These words are meant to shock the audience but no
longer have the impact they once did because of their overuse and because of
the likely lack of any substantive outcome. What Americans have seen
are trials without consequences, clear proof of guilt with no
punishment. Draining the swamp without
any repercussions to the swamp creatures inside is like going on a diet but
eating the same foods.
Americans witnessed no accountability
regarding exhaustive investigations into the deadly circumstances surrounding
the swamp's gun-walking campaign named Fast and Furious, a program where U.S.
Border Patrol agent Brian Terry and hundreds of innocent Mexican citizens were
killed with guns the government sold to criminals. The swamp
continued on its power mission and attempted the deceitful confiscation of
America's health care with Obamacare, whose real aim was a redistribution of
the nation's wealth. After little pushback and the passage of
Obamacare, Americans witnessed Benghazi in 2012, and when nothing
was accomplished over the investigations of that tragedy, the swamp trampled on
the rights of conservatives in what became known as the IRS scandal of
2013. Nothing was done about that. And on and on, with
the swamp committing one bigger and bolder crime after the next with
impunity.
So we have arrived at the doorstep of
the Russian collusion investigation farce by first traveling through the swamp
of unsolved crimes perpetrated inside the Obama administration. With
the passage of time, swamp-dwellers like Eric Holder and Lois Lerner,
knee-deep in the mud with congressional contempt charges, continue to be
financially enriched and will slowly be forgotten, while more recognizable
swamp royalty like Hillary Clinton get to run for president.
Until Americans see
guilty members within the United States government wearing orange jumpsuits and
serving time, the investigations and congressional hearings are mere sideshow
spectacles to appease the masses.
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