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Tag Archives | recession

Will capitalism solve its crisis with more wars?

Dave Riley responds to our ‘Dr. Doom’ Roubini. ‘Karl Marx was right‘ post (promoted from the comments).

We are not so fortunate that the wagon will fall over all by itself as the key question is what is it that it can be so destructive? But herein lies the bare bones of a solution — like an old penny: if there is excess capacity, destroy it and built it up again and/or create new aggregate demands.

Voila!

Welcome to World War II –the means by which capitalism saved itself from the self-destruction long wave of the Great Depression. Maybe it costed a few tens of million dead and maybe capitalism lost markets big time as large portions of the planet went soviet style, but the post war boom merely confirmed the wisdom of the 1939-1945 entrepreneurial enterprise as a ‘solution’.

Good times were to had this side of the slaughter.

The problem is: what now? As the populace gets testy and angsty do we have to put up with another round of fascism so the feral masses are kept in check? Is there any capacity on hand worth the destruction? Laying to waste the infrastructure of Iraq is small potatoes compared to the great European and Pacific wars. And no Marshall Plan is on offer for Baghdad’s high rollers…

So the irony is that despite laissez-faire neo-liberal capitalist groupthink the most reliable solution is a state bail out assuming the state is still rich enough still to do it.

What a contradiction!

The irony is that if there weren’t so many ideological constraints — funding a war footing shift to a sustainable economy based on renewables is a short-term panacea as that would suck up capacity and extend markets in a similar way to the state-run infrastructure programs of the thirties…as did the Second World War.

Outline (albeit a little dated),

The problem is that when capitalism is in deep shit crisis things get desperate and so do the solutions: fascism, war….barbarism. But you need to recognize that this crisis set in in 1974 and today’s mess is but one symptom of the failure to solve the underlying problem that set in 40 years ago during this current economic wave. Despite the driving down of wages and the looting of the capitalist states; deflector military spending and the collapse of the Soviet Union…all we have had is band-aid measures.

I blog about California renewable energy at CAIVN and it’s clear that the California government sees renewable energy and cleantech as the primary way to revitalize their economy. I’m not so optimistic. As Dave points out using other examples, the money to do so just isn’t there. That’s the huge difference between WWII and now. The US came out of the war with a booming economy, make even more powerful by being paid to rebuild in Germany what it had just bombed. But the wars now have had the opposite effect. The economy is weak and getting weaker. Could a massive push nationally towards renewables transform the economy? It would certainly help. But we need jobs in many more areas besides renewables, a sector which is still comparatively small and which requires serious technical chops and skills for most jobs.

It’s those band-aid measures that are the problem. The elites have mostly abdicated any responsibility for society at large. The result is hollowed-out governments with no real direction.

So, if we can’t get out of our economic malaise by war or a switch to renewables, then how will we do it?

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Housing is double dipping


And this chart was before foreclosuregate

Zillow – a real estate cheerleader if there ever was one – is now predicting an “unprecedented decline” worse than the Great Depression

Meanwhile, the Obama Administration continues to send billions to Wall Street while doing little to help Main Street or homeowners and seems asleep at the wheel on foreclosuregate.

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Both parties are complicit in our economic collapse


No, that can’t be, some say. The recession is clearly all the fault of the other political party. They are the evildoers. We are the good guys. Actually, no. When it comes to our economic crisis, which was triggered by the cratering of the subprime market, both parties share much blame. The policies and actions of both parties, along with their deep coziness with the financial sector, created a bubble that was destined to explode. Garbage securities were sold with no accountability or regulatory oversight. Long-standing laws limiting bank power were repealed. Federal entities guaranteed mortgages that should never have been issued. And now, with the foreclosure debacle upon us, it’s clear that fraud and corruption are rampant.

Regulatory agencies were gutted and rendered as ineffective as possible under both Bush Administrations. They cut budgets so the agencies would be understaffed and made it clear that ambitious prosecutions would not be welcome. This was done in the Randian belief that markets, if only left alone by an interfering government, would regulate themselves. Can we please throw this bizarre belief in the scrap heap of history? Markets, if left alone, do not play nice. Rather, they turn into pirates. The events of the past few years conclusively demonstrate this.

Under Clinton, the Department of Housing and Urban Development undertook to increase home ownership from 60% to 70%. Subprime mortgages were the vehicle for this (by a bizarre coincidence, these were also the mortgages that Wall Street made the most money from.) Fannie Mae and Freddie Mac backstopped the mortgages by guaranteeing them. Clinton cheerfully presided over repeal of the Glass-Steagall Act, a law which had been in effect since the 1930’s and which prevented certain types of bank mergers. These two actions led directly to the creation of the subprime bubble.

The floodgates opened. All manner of NINJA (No Income, No Job, and No Assets) mortgages went flying through the system, were bundled together and securitized. Wall Street made billions. Since the regulatory agencies were snoozing, no one cared much that the foundation for all of this, subprime mortgages, was made of sand.

Financial bloggers like Calculated Risk and Mish were way ahead of the mainstream media and the government on predicting the collapse of subprime. They were early and right. Subprime imploded and took the economy with it. The states where the real estate bubble was the most extreme, like California. have suffered the worst, with high unemployment and foreclosure rates.

Obama was backed early and with huge contributions by Wall Street. He was their guy. Hillary was too independent for them. McCain thought them to be “spoiled brats and ruthless opportunists” who would take bailout money, keep it, and then pay themselves huge bonuses. (He was right.)  This is from Charles Gasparino’s new book Bought and Paid For: The Unholy Alliance Between Barack Obama and Wall Street.,He details the decades-long alliances of both parties with Wall Street. And if you’re a liberal who thinks the book must be suspect because Gasparino is a conservative, then you don’t get the point. Both parties are culpable.

Obama had no such qualms about with Wall Street. He told them their mortgages were swell and then, after the economy collapsed, asked them for advice on how to fix it. Did he understand he was asking the architects of the disaster how to rebuild what they previously destroyed? Apparently not, because he bought several of them, Geithner and Summers among them, into his administration. Obama also allowed accounting rules to be neutered so banks no longer had to mark-to-market. They instead are now permitted to price their holdings as they deem fit. They then book illusory profits and pay themselves more huge bonuses. You and I have to mark-to-market. The big banks don’t.

The financial blog Zero Hedge has done a superb job of exposing financial fraud and criminality. They say The fraud started at the very top: With government leaders of both parties. So, what do we do? Yelling that the other side is to blame is pointless and self-defeating. Instead, citizens on all sides of the political spectrum can educate themselves on these issues, insure that the issues stay in the public spotlight, organize in their geographical areas, and then maybe gain real political power. This is precisely what the Populist Party did in the 1890’s. They were farmers who were losing their farms to predatory banks and being gouged by crop speculators. They joined together to form co-ops to buy their goods at a fair price, and then became a national force. The trust-busting of Teddy Roosevelt was certainly influenced by the populists.

We’re seeing an upsurge of populism now. As far as I’m concerned, bring it on. Because something needs to be done.

(Crossposted from CAIVN)

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Impeach Bernanke. Now

This is from Karl Denninger. He co-founded the Tea Party specifically in opposition to the theft of taxpayer money to bail out failed companies and recently blasted its current incarnation as being about “the usual pablum. Guns, gays, God” and not about the economic crisis.

The Tea Party was initiated as a political protest against the unlawful and in fact unconstitutional usurpation of power from the Congress and The People in the form of extortion-led bailouts of enterprises that had engaged in acts that I, and many others, believe were at least civilly actionable and in many cases crossed the line into criminal activity.

Many of those brought on or kept on by the Obama Administration to get us out of the economic crisis are precisely the same people who created it. Worse, it’s obvious that massive fraud and criminality were rampant but the government still has made no criminal indictments, which is appalling.

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