“the rings of Saturn are in all likelihood… fragments of a former moon that was too close to the planet and was destroyed by its tidal effect.”
September 29, 2008
“still and moving images of the most intense available moments of human anguish.”
(Rosenbaum. “the process by which torture becomes a box office staple may indeed not be too difficult to understand”)
September 25, 2008
Okay. So I think it’s clear enough that I don’t know what I’m talking about. But even though the blog is, yes, still dormant, it seems shameful not to post anything at all on the financial crisis. Major apologies for ignorance & incomprehension. This incredibly confused stuff is all coming out of newspaper-skimming and blog-glancing. But so:
First aspect of crisis: Panic in the financial markets. Nobody trusts anybody; nobody will lend to anybody. Collapse of public fact. Made possible by. 1) Deregulation. (See below.) 2) Hideously complex and complexly interlinked financial assets. (Nobody really knows where the ‘bad debt’ is.) Plus you’ve got all sorts of vast financial institutions that aren’t investing from any kind of semi-solid capital base (say, bank deposits), but are relying rather on short-term interbank lending. Domino effect, positive feedback loops, etc. (Plus everything’s leveraged to the gills). Deregulation to blame for all this.
Domino effect prompted, obviously, by specific bad debt = subprime mortgages. Flogged dead horse, this. Banks lying to borrowers about seductive but extortionate deals; borrowers lying to banks about whether they have money, etc. Deregulation to blame here also.
Subprime mortgage fiasco symptom of larger problem. Crisis aspect the second: recent U.S. consumer spending fuelled by debt. Middle and working class wages stagnant for thirty years; breaking of the back of labour; long-term retreat / collapse of left; victory to capital in the capital-labour conflict. Economic growth nonetheless still fuelled by increasing consumption. Gap between consumers’ income and expenditure plugged by household debt. Debt has to be repaid, and can’t be repaid without decline in expenditure. Unsustainable growth. (Enables a massive transfer of resources to the capitalist class.) (Roger‘s been talking about all this for years.)
Credit bubble made possible at a domestic level by Fed policy – interest rates kept low; value lost in internet bubble’s collapse recreated in housing bubble. Vast credit boom sustaining domestic expenditure itself sustained by US borrowing from overseas. Dollar = world’s reserve currency, so US able to run eye-boggling external debt.
Crisis aspect the third, then. Burgeoning external debt corresponds with decline in credibility of US as debtor. Postwar credit boom backed by dollar as reserve currency; dollar as reserve currency backed by US hegemony. Rise of China, India, Russia, developing nations all over, producing now-very-advanced transition to multi-polar geopolitical order.
All this is, I hope (???), passably adequate, as horrible crude summary. The post-war order has worked to appropriate the resources of the ‘developing’ world, based on a system of free trade oriented towards and underwritten by American power. The conveyor belt of resources from poor world to rich is maintained by the power-sodden ‘price mechanism’ – the products (and labour) of the poor priced cheap, the products (and labour) of the rich priced high: exchange of equal values = massive appropriation.
As US hegemony falters, expenditure comes to rely on borrowing from overseas. Within the US economy, comparable movement of resources from the working- and middle- to the ruling classes also comes to based, from the eighties onward, on the extension of credit. The deregulation that permits massive debt expansion is also part of the market fundamentalism that justifies and underwrites the global system of free market exploitaiton. [Apologies for so much boiler-plate stuff. There’s some content here, I think, beneath the confusion.]
Three interlinked failures of the economic system, then. 1) Just general shadiness of deregulated financial markets, which make panics, and corresponding liquidity-collapses, more likely and more severe. 2) But panic’s based on the fact that it’s not possible to appropriate indefinitely income that only exists through borrowing. Solvency, not just liquidity, failure. 3) And all this based on a more general failure of globalised markets, in an era of waning American power, to supply quite enough resources to the developed world, given growth requirements. The financial sector is, by definition, non-productive. If it’s going to keep making people money, there has to be a corresponding growth in the real economy. US production ain’t all that; and the global trade system isn’t supplying enough stuff to sustain expansionist greed. I think. (?????)
Plus, you know, crises are just a feature of capitalism. Wages are depressed by the capitalist drive to profit – which means demand is reduced, because no one can fucking buy anything – which means a crisis of overproduction. Since the long-term depression of wages has been ‘masked’ by the credit bubble, its only when the bubble bursts that the crisis hits, and the ‘real’ redistribution takes place. That redistribution is currently being managed by the US elite, obviously – but it also involves systemic change, as the capitalist institutions that enabled the appropriation are threatened or destroyed by its effects. We’re in the middle of a major structural transformation – and there’s little thought going into how it’s managed – what kind of capitalism ‘we’ (whether Bushites or the all-but-non-existent left) want to see, after the death of neoliberalism.
The calamitous Paulson plan is calamitous for various reasons. No fucking oversight to speak of. Absolutely no attempt to limit executive pay-packets. But above all, obviously, the fact that it’s a simple redistribution from the taxpayer to Wall Street. As Calculated Risk says: “The plan only limits the Treasury to “$700,000,000,000 outstanding at any one time”, so the total purchases can exceed $700 billion. In fact, every time the Treasury sells some securities, they will probably plow the net proceeds back into more troubled assets until the entire $700 billion is gone.” Paul Krugman has been banging the drum over what price ‘troubled assets’ will be bought at. If they’re bought at market value, there’s no injection of capital; financial trading may be kick-started, but there’s no end to the insolvency crisis. If, on the other hand, ‘troubled’ assets are bought at above market value, it’s just a giveaway (with corresponding theft). And this is a problem not only because it’s obscene, but also because we’re in a crisis driven, in part, by lack of demand due to wage-depression – so transferring money from consumers to financial institutions = extra-bad. Paulson, Bernanke et al are obviously working for Wall Street – but the logic of the system is such that individual capitalists get rich by destroying their means of exploitation.
The Chris Dodd alternative proposal would (if I understand right?), give the newly-created government entity (the ‘bad bank’) conditional shares in any firms from which bad assets are bought. Value of shares = 125% of the losses incurred from resale of assets. Recent news reports seem to claim that Paulson et al have accepted something like this – which I’ll believe when I see.
Point remains: there’s a frightening lack of vision in response to the implosion of capitalism’s current form. Just to be clear: it’s absolutely not worth crowing over former-fat cats getting pissed at the Slug and Lettuce. They’ll all have smart jobs in whatever new order emerges. Capitalism reproduces itself through crises – question is: what’s next. Obviously, nationalisation is back on the policy agenda.
But underlying story = a historic moment in the decline of US power. The Pax Americana was, of course, only pax if you ignored the countless violences that maintained it. But the last time a superpower lost its ability to appropriate the world’s resources through laissez-faire trade, we had two world wars, separated by a great depression. Economists tell us that free trade stops wars. In fact, of course, decisive military dominance enables ‘free’ trade.
The two big questions rasied by all this are, then:
What kind of new capitalist system will be born from this restructuration?
How will it relate to a new multi-polar world?
[Subsidiary question: How many of us will die in the coming wars for resources, as the idea that free trade binds us all together in a Fukuyamian paradise of mutually non-coercive recognition and exchange goes the way of Hegel’s Prussian state?]
[Bonus marks: how hard can it really be to develop a credible alternative to the dominant ideology, so that when that ideology collapses under the strain of its system’s contradictions, something more human is ready to take the stage? This crisis has been a disaster for the left.]
[I should really edit, expand, and perhaps then supress, all of this. But the BBC says agreement’s been reached about the US bailout plan – so I’ll post it now before all of the above is rendered obsolete. Serious serious apologies for incredibly weak knowledge & analysis. Not to mention typos, etc. * sigh *]
September 21, 2008
“The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time”
“Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection” [$8,184,000,000,000] “and inserting in lieu thereof $11,315,000,000,000.”
“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency”
September 20, 2008
From today’s FT leader:
“Naturally, the need for such a government-sponsored rescue is annoying. Taxpayers may well wish for the imposition of a special tax on recipients of what have turned out, retrospectively, to be unearned dividends and unjustified salaries. But demanding such a pay-back is infeasible. The pragmatic thing to do is let bygones be bygones…”
September 15, 2008
September 7, 2008
From this week’s Economist
“Outside the Republican convention, largely peaceful protests were marred by a few thugs who smashed windows. More violent disruptions were avoided, however, because police informants infiltrated a gang of anarchists who were allegedly planning them. Police seized weapons and buckets of urine, apparently intended for throwing at people. Lawyers for some of those arrested demanded the return of their possessions. ‘Who should we return the urine to?’ asked the judge, according to the Star-Tribune, a local paper.”