For those of you who haven't read your Greek mythology, Cassandra was a prophet who is said to have lived during the Trojan war. The gods gave her the ability to predict the future, but doomed her to be ignored by everyone and made powerless to change anything.
Today we're faced with a glut of Reverse Cassandras.
What's a Reverse Cassandra? A Reverse Cassandra is somebody with the power to change things and who everybody listens to and heeds, but really this person doesn't have a clue and is promoting an innaccurate, rosy view of the future.
Emissaries from the global ruling classes have been telling us that we've hit the bottom of the economic downward slide. Fed Reserve Chairman Ben Bernanke said as much yesterday, President Obama has been talking for weeks about "glimmers of hope", the EU says we're no longer in freefall - the latter even going so far as to send the French minister of finance to that red-white-and-blue bastion of mainstream American liberalism, The Daily Show, to tell us that, indeed, we may have reached the bottom. Even the usually dour (neo)liberal talking-head Paul Krugman is seeing the "green shoots" of new growth!
But on what basis are they making these claims?
Now, I'm no trained economist, and I certainly don't have Cassandra's prescience, but I'd like to explain my reasons for thinking that these people are wrong.
Firstly, these people are career liars whose sole purpose is to mislead and keep down the working class.
That's an opinion, of course, but it's an opinion based on evidence. These folks bought into the neoliberal lie -- hook, line and sinker. In 2002, Bernanke said thanks to the guiding influence of that godfather of free-market fundamentalism, Milton Friedman, we would "never again" have another Depression-like economic crisis. As for Krugman, who is portrayed in the media as the far-left alternative to the status quo, you should remember that this was the same guy who thought that US monetary policy would solve all employment problems, and that folks who thought the financial and economic problems of the 1930s would repeat themselves were not "sensible people". [1]
From a more evidential perspective, having gone through the reports these bodies have published -- looking with all my little heart of hearts for the glimmers of hope -- I've found very few positive signs.
For example, the EU had to revise their predictions this month, because economic contraction has been shown to be twice as bad as they had expected. However, measures like consumer confidence are high. Well that's just great! Unfortunately, confidence has little to do with reality -- wages are likely to continue declining, meaning less purchasing power for workers, meaning even lower demand, etc. The only good news these days seems to be coming out of China, which even before the crisis was producing massive surpluses (literature on China is extensive, but David Harvey has the best analysis out there for my money).
So while the Reverse Cassandras tell us the sky is not, in fact, falling, the situation continues to get more and more dire.
If I haven't already made this clear, the existing ruling class in the US is incapable of getting us out of this mess. They're already preparing us for permanent, mass unemployment, as remarks by former Fed Reserve Chairman and current Chairman of the President's Economic Recovery Board Paul Volker indicate. According to Volker, the new, "natural" rate of unemployment will be much higher. If this indeed does come to pass, this will mean a jobless recovery which is even worse than those we've experienced before.
I'd like to end on a somber note. I'm currently reading Jeffry A. Frieden's Global Capitalism: Its Fall & Rise in the Twentieth Century, which is a flawed but comprehensive overview of global economic history from the late nineteenth century til 2000. I'm getting to the part right now where World War I has just ended, and the new postwar economic order is coming into being. This proves to be disastrous, and a young John Maynard Keynes goes on to write a best-selling polemic outlining its failures. The important thing here is this: the ruling classes of Europe failed miserably. They led their societies into a maelstrom of destruction and horror which lasted almost forty years, leading from world war to hyperinflation, to depression and world war all over again.
I leave it to the reader to draw any contemporary parallels.
After all, the only thing worse than a Reverse Cassandra is the genunine article.
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[1] The reason I'm so adamant about pushing socialism to the forefront of the public debate, is that there needs to be another set of alternatives in the discussion about our collective futures. Our current range of options leave us with little room to maneuver -- from the psuedo-Keynesianism of Paul Krugman on the "left", to the "centrist" policies of the Geithner-Summers banking elite - fully backed by the administration of Barack Obama (policies which amount to a massive robbery of public coffers to pay off the bad investments of the financial class), and on the right, the Alice In Wonderland/living-in-a-fantasy world economics of the Tea Baggers and the Republican Party.
Showing posts with label Topic: Economic Crisis. Show all posts
Showing posts with label Topic: Economic Crisis. Show all posts
Tuesday, May 5, 2009
Tuesday, April 21, 2009
"An angry army to give the government back to those who have always been the champions of special privilege" (Brian) by Winston
The contemporary recruitment of which could have been started at the "tea parties"??
J'Accuse! (Aug. 19, 1939) Sen. Claude Pepper (who himself later became a Cold Warrior), from The Progressive:
J'Accuse! (Aug. 19, 1939) Sen. Claude Pepper (who himself later became a Cold Warrior), from The Progressive:
Thursday, March 19, 2009
Galbraith: "No Return to Normal" - Forget the Banks, Bring on the New Deal (X.) by X.
The prominent liberal economist James K Galbraith just published an essay titled No Return to Normal in the Washington Monthly in which he unambiguously argues that the scale of the current financial crisis will radically transform the capitalist economic system for the foreseeable future. Galbraith argues that the banking system, no matter how much cash it is handed over by the Feds, cannot and will not provide consumer credit since consumers are already mired in debt that they cannot repay with their current level of income.
Galbraith, a Keynesian capitalist (i.e. he believes that capitalism is the best available economic system but that it requires strong government intervention to remain "stable") of course does not consider either of the two principal revolutionary democratic proposals to address that fundamental problem: 1) Forgive the debt (which revolutionaries can help bring about by building a nationwide debtors' union) and increase workers' share of the wealth they produce at the expense of the capitalists (which revolutionaries can help bring about by encouraging workers to struggle for democratic governance and a share of the profits at their companies, or even better, developing cooperative businesses jointly-owned and operated by the workers). Like the conservative economists crying "let them eat bread", Galbraith only considers the possibility of people massively reducing their consumption and increasing their savings. As a liberal Keynesian economist, he worries about people's welfare however and thus recommends a fairly radical New Deal plan that should give us a sense of how far we can push the Obama administration to provide resources that could be channeled to build dual power. Check out this excerpt:
"That being so, what must now be done? The first thing we need, in the wake of the recovery bill, is more recovery bills. The next efforts should be larger, reflecting the true scale of the emergency. There should be open-ended support for state and local governments, public utilities, transit authorities, public hospitals, schools, and universities for the duration, and generous support for public capital investment in the short and long term. To the extent possible, all the resources being released from the private residential and commercial construction industries should be absorbed into public building projects. There should be comprehensive foreclosure relief, through a moratorium followed by restructuring or by conversion-to-rental, except in cases of speculative investment and borrower fraud. The president’s foreclosure-prevention plan is a useful step to relieve mortgage burdens on at-risk households, but it will not stop the downward spiral of home prices and correct the chronic oversupply of housing that is the cause of that.
Second, we should offset the violent drop in the wealth of the elderly population as a whole. The squeeze on the elderly has been little noted so far, but it hits in three separate ways: through the fall in the stock market; through the collapse of home values; and through the drop in interest rates, which reduces interest income on accumulated cash. For an increasing number of the elderly, Social Security and Medicare wealth are all they have.
That means that the entitlement reformers have it backward: instead of cutting Social Security benefits, we should increase them, especially for those at the bottom of the benefit scale. Indeed, in this crisis, precisely because it is universal and efficient, Social Security is an economic recovery ace in the hole. Increasing benefits is a simple, direct, progressive, and highly efficient way to prevent poverty and sustain purchasing power for this vulnerable population. I would also argue for lowering the age of eligibility for Medicare to (say) fifty-five, to permit workers to retire earlier and to free firms from the burden of managing health plans for older workers.
This suggestion is meant, in part, to call attention to the madness of talk about Social Security and Medicare cuts. The prospect of future cuts in this modest but vital source of retirement security can only prompt worried prime-age workers to spend less and save more today. And that will make the present economic crisis deeper. In reality, there is no Social Security "financing problem" at all. There is a health care problem, but that can be dealt with only by deciding what health services to provide, and how to pay for them, for the whole population. It cannot be dealt with, responsibly or ethically, by cutting care for the old.
Third, we will soon need a jobs program to put the unemployed to work quickly. Infrastructure spending can help, but major building projects can take years to gear up, and they can, for the most part, provide jobs only for those who have the requisite skills. So the federal government should sponsor projects that employ people to do what they do best, including art, letters, drama, dance, music, scientific research, teaching, conservation, and the nonprofit sector, including community organizing—why not?
Finally, a payroll tax holiday would help restore the purchasing power of working families, as well as make it easier for employers to keep them on the payroll. This is a particularly potent suggestion, because it is large and immediate. And if growth resumes rapidly, it can also be scaled back. There is no error in doing too much that cannot easily be repaired, by doing a bit less."
The whole article is worth reading, find it here.
Galbraith, a Keynesian capitalist (i.e. he believes that capitalism is the best available economic system but that it requires strong government intervention to remain "stable") of course does not consider either of the two principal revolutionary democratic proposals to address that fundamental problem: 1) Forgive the debt (which revolutionaries can help bring about by building a nationwide debtors' union) and increase workers' share of the wealth they produce at the expense of the capitalists (which revolutionaries can help bring about by encouraging workers to struggle for democratic governance and a share of the profits at their companies, or even better, developing cooperative businesses jointly-owned and operated by the workers). Like the conservative economists crying "let them eat bread", Galbraith only considers the possibility of people massively reducing their consumption and increasing their savings. As a liberal Keynesian economist, he worries about people's welfare however and thus recommends a fairly radical New Deal plan that should give us a sense of how far we can push the Obama administration to provide resources that could be channeled to build dual power. Check out this excerpt:
"That being so, what must now be done? The first thing we need, in the wake of the recovery bill, is more recovery bills. The next efforts should be larger, reflecting the true scale of the emergency. There should be open-ended support for state and local governments, public utilities, transit authorities, public hospitals, schools, and universities for the duration, and generous support for public capital investment in the short and long term. To the extent possible, all the resources being released from the private residential and commercial construction industries should be absorbed into public building projects. There should be comprehensive foreclosure relief, through a moratorium followed by restructuring or by conversion-to-rental, except in cases of speculative investment and borrower fraud. The president’s foreclosure-prevention plan is a useful step to relieve mortgage burdens on at-risk households, but it will not stop the downward spiral of home prices and correct the chronic oversupply of housing that is the cause of that.
Second, we should offset the violent drop in the wealth of the elderly population as a whole. The squeeze on the elderly has been little noted so far, but it hits in three separate ways: through the fall in the stock market; through the collapse of home values; and through the drop in interest rates, which reduces interest income on accumulated cash. For an increasing number of the elderly, Social Security and Medicare wealth are all they have.
That means that the entitlement reformers have it backward: instead of cutting Social Security benefits, we should increase them, especially for those at the bottom of the benefit scale. Indeed, in this crisis, precisely because it is universal and efficient, Social Security is an economic recovery ace in the hole. Increasing benefits is a simple, direct, progressive, and highly efficient way to prevent poverty and sustain purchasing power for this vulnerable population. I would also argue for lowering the age of eligibility for Medicare to (say) fifty-five, to permit workers to retire earlier and to free firms from the burden of managing health plans for older workers.
This suggestion is meant, in part, to call attention to the madness of talk about Social Security and Medicare cuts. The prospect of future cuts in this modest but vital source of retirement security can only prompt worried prime-age workers to spend less and save more today. And that will make the present economic crisis deeper. In reality, there is no Social Security "financing problem" at all. There is a health care problem, but that can be dealt with only by deciding what health services to provide, and how to pay for them, for the whole population. It cannot be dealt with, responsibly or ethically, by cutting care for the old.
Third, we will soon need a jobs program to put the unemployed to work quickly. Infrastructure spending can help, but major building projects can take years to gear up, and they can, for the most part, provide jobs only for those who have the requisite skills. So the federal government should sponsor projects that employ people to do what they do best, including art, letters, drama, dance, music, scientific research, teaching, conservation, and the nonprofit sector, including community organizing—why not?
Finally, a payroll tax holiday would help restore the purchasing power of working families, as well as make it easier for employers to keep them on the payroll. This is a particularly potent suggestion, because it is large and immediate. And if growth resumes rapidly, it can also be scaled back. There is no error in doing too much that cannot easily be repaired, by doing a bit less."
The whole article is worth reading, find it here.
Wednesday, March 18, 2009
Class Struggle and AIG (Posted by Keith) by Keith
Eliot Spitzer, the “disgraced” former Governor of New York (he was caught with an expensive prostitute but he was “caught” as a part of the class struggle—he had been going after financial capitalist before it became a congressional past time, and they brought him down in a scandal) published this essay in Slate.com this week. Although he speaks about “insiders” rather than the financial capitalist he points out the relationship between AIG and Goldman Sachs. Goldman Sachs is basically merged with the U.S. state and have their tentacles all over Obama’s administration. An immediate task is to defeat the financial class within the Obama administration. Jim wrote a nice essay about some of the class struggles within the Obama administration.
Here is the Spitzer article:
The Real AIG Scandal
It's not the bonuses. It's that AIG's counterparties are getting paid back in full.
Everybody is rushing to condemn AIG's bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?
For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman's collapse, they feared a systemic failure could be triggered by AIG's inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG's trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.
It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG's counterparties are justified with an appeal to the sanctity of contract. If AIG's contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.
But wait a moment, aren't we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes—income taxes to sales taxes—to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won't be laid off. Why can't Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash? Haven't we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn't they have accepted a discount, and couldn't they have agreed to certain conditions before the AIG dollars—that is, our dollars—flowed?
The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.
So here are several questions that should be answered, in public, under oath, to clear the air:
What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?
Was it already known who the counterparties were and what the exposure was for each of the counterparties?
What did Goldman, and all the other counterparties, know about AIG's financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn't they bear a percentage of the risk of failure of their own counterparty?
What is the deeper relationship between Goldman and AIG? Didn't they almost merge a few years ago but did not because Goldman couldn't get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG's business model was not to pay on insurance it had issued.
Why weren't the counterparties immediately and fully disclosed?
Failure to answer these questions will feed the populist rage that is metastasizing very quickly. And it will raise basic questions about the competence of those who are supposedly guiding this economic policy.
Sunday, March 15, 2009
More From the Credit Card Front (Brian) by Winston
I know - it seems like I'm obsessed with their chicanery, tomfoolery, and shenanigans...well, at least the tomfoolery - so I'll make this a quickie (I'm doing lesson planning on the Lowell mills anyway)
This piece describes what represents a new low...figuratively and perhaps literally...
Basically, you could wake up tomorrow with your credit limit very close to or below your actual current balance... yikes!
This piece describes what represents a new low...figuratively and perhaps literally...
Basically, you could wake up tomorrow with your credit limit very close to or below your actual current balance... yikes!
Monday, March 9, 2009
China, and What to Do With All Those Factories (Rob) by Rob L
In an effort to review the underling conditions and causes of the present crisis, it seems that the following converging factors are true:
Real wages have been stagnant or declining vs. inflation for three decades and have reached a critical point of stress.
Neoliberal foreign policy has deteriorated domestic industry, transferring instead to developing nations.
Excessive military spending has starved the U.S. budget from maintaining domestic necessities like healthcare and education.
Like in 1991, oil interests, responding to aggressive foreign policy in the Middle East, drove up oil prices, causing domestic strife and a slowdown in global trade.
Deregulation of financial markets allowed and caused the market collapse that tipped the hand on the diseased domestic and global economy.
The world financial system was so heavily invested in the SP Mortgage schemes that no country will escape this depression.
The above points have been expounded upon by various interests and spatter a significant portion of even the lauded pages distributed by the New York Post. Here on these pages, views have come from unexpected sources, traffic has increased dramatically, and new perspectives come from brothers and sisters far away, working on their own causes. This brings us to a certain level of understanding, an even footing from which new conclusions may be approached.
A good deal of attention has been paid to the role of information technology in this crisis and the future of democracy. This is important work, since a more informed understanding of the next few years forms a structure upon which achievable plans can be erected and sculpted into reality. Is it possible, however, that technology is not yet the most powerful force in society?
There has been much said about debtor resistance to financial capital. Again, a truly massive democratic movement can not sustain itself without achievable, universal goals to rally the people. Here, there is a good deal of work left to do, especially at the ground level. Can those strategies ever mean anything more than temporary solutions to a transitory economic state?
Stand on those questions for a time. Be assured they will remain while something else takes the stage. What has been said above all comes from an informed conception of the present world. Unreality has always been a much more attractive way to look at this world, however. It might even prove elucidating to take an unwarranted perspective on weighty issues. Science Fiction has served a role in this type of analysis since its first development under the weight of a rapidly nationalizing, ceaselessly industrializing community of intellectuals. Through their visions of electric life, and mechanical wonders, these first futurists were expanding upon the ethics of their own time. The steam powered future was a safe place to explore human values, politics, and dangers without upsetting a paranoid ruling class.
With that in mind, the trends in contemporary science fiction prove useful in highlighting the present situation that is not simple enough to understand as a whole. Is it any wonder that cyberpunk enthralled readers and speculators alike in the midst of the neoliberal revolution? From Blade Runner, to 5th Element, to Firefly, deeply sensitive humanists extrapolated a world where corporate power could not be restrained from its inexorable rise to primacy. The Star Trek crew battled Russians in space, where The Next Generation brought down the wall. Enterprise instead related how the small minded creatures with a never quit attitude learned to walk the stars as humans aught to.
Cyberpunk heralded a world where humanity was lost somewhere between the net, machine implants, and corporate greed. This period of fiction predated the mystical optimism of the singularists, so machine parts on a human frame meant a sort of death of the soul and the internet was just one more tool of global control. One more consistent trait to the genre was that it was universally a Japanese world. Decades of stellar growth and a conversely floundering American business community prompted an undeniable pattern forming around a preeminent Japan, or rather, her corporation’s eventual dissolution of state power. When Japan’s economy collapsed, however, the prophecies of a world that lived under its dominance ceased to be published or even thought about.
Futurist fiction drifted to other things for a time, without quite finding a center. In fact, despite several market fads, a new school of science fiction can’t truly be pinned down just yet. It seems Vernor Vinge’s singularity is an insurmountable wall past which authors feel unqualified to climb. In the absence of a discernable future to extrapolate, steampunk and fantasy literature has experienced a remarkable rise.
A few die hard writers haven’t given up their rockets and hyper drives just yet. While no new themes have emerged, one striking consistency has emerged, the primacy of China. Joss Whedon's Firefly universe stands as the most popular image of this as a network series where all the characters regularly blurt un-translated mandarin and are surrounded by Chinese culture and writing. If China has replaced Japan as the default post-American power of choice, what does that say about what is happening now?
China is expected to post 8% growth to GDP for 2008 - once again, the largest gain out of all countries. In the wake of Neoliberal trade agreements, western heavy industry has coalesced there and in other Asian countries. The jobless recovery of the previous recession is slated to repeat on a wider scale during this depression due to the continued emigration of industry and service jobs. If it is true that domestic recovery will depend upon a return to manufacturing and infrastructure, and we folded that hand long ago, which player is going to win the pot?
Watching the Asian markets will be essential to understanding the world on the other side of this depression. China is presently investing their $600 billion stimulus package into retooling and modernizing their factories on a massive scale. While they can’t help but be carried along in the wake of the crisis, they stand a good chance of staying afloat in general. Since they presently hold $2 trillion in US currency, they also find themselves well funded to outlast the deeply indebted western nations.
There are some trials to overcome, however. The region’s inflation driven economy survives on a significant trade surplus which is drying up. China’s present plan is to readjust their target markets to developing nations, for instance, by producing low cost clothing lines that could supply African and South American states’ rapidly growing urban populations. More peripheral, but not insignificant countries like Brazil are already recovering from the crisis and this play could be a winner.
The Asian markets are holding the cards, the developed, maintained, and growing infrastructure to produce their way out of recession. The West, however, will be forced to rebuild and radically modernize what they have ignored or sold off. It is difficult to pierce the veil over Chinese politics, but with their recent adoption of the 3G wireless standard, internet access will continue to expand, a process that will result in more connection and communication. Coupled with a consistently rising standard of living and real wages, it is time to watch China for a return to democratization and inclusive reform.
Now, place this along current discussions surrounding technology and debtor resistance. Are we prepared to enter the world of tomorrow, when we lack the tools today? Resisting oppressive debt will free potential revolutionaries from burdens no person should bear, forced on the people by powers that have less and less basis in material reality. Technology and the careful adoption of new practices will ensure that these oppressed today are active and connected tomorrow, because networking is a better lever to pull on society's hinges. Put all this in context with a world balance of power that may just be shifting to another sphere. In a world past capitalism, there shouldn't be spheres of power, and we'll get there if we live long enough to get anywhere at all. A refocus of power to the Asian markets, however, could radically change to path to change.
Friday, March 6, 2009
Crisis in the Real Economy (Posted by Asher) by Keith
This is an analysis of economic data published in the Financial Times last weekend by friends at Radical Perspectives on the Economic Crisis.
Evualuating the Numbers
Japan's stunning 'free-fall' is indicative of a broader phenomenon, the rapid decline in global trade and demand for finished goods. Japan's banking system, having been relatively insulated from the toxic assets and exotic debt instruments that poisoned so many western banks, is still afloat. The crisis in the world's second largest economy is further proof of a crisis of the economy proper; i.e., not a crisis of finance. For those economists, journalists and politicians who believed this crisis to be essentially financial (there really are very few left) Japan's erosion should provide good reason to stop calling it the financial crisis and start calling it what it is: an economic crisis.
A few notes on the implications of the data on Japanese exports:
The Yen has been appreciating rapidly since the crisis began. Investors pulling money out of other markets poured their financial wealth into the seemingly safe Japanese currency (this was accompanied by a similar but less extreme process forcing appreciation of the dollar). Since the collapse of Lehman Brothers, the higher the level of fear in the markets1, the higher the Yen. This relationship has broken down of late due to fears that the Yen is now grossly over-valued and fears associated with export and industrial output data. We can expect depreciation of the Yen. This will likely lighten the gloomy data on exports but the extent to which any relative recovery in exports takes place will be a good indicator on the strength and prospects of the global economy. Positive change in exports is unlikely although a reduction in the rate of decline should be expected. It is looking grim.
Accordingly, this gloomy economic outlook combined with the seemingly divided and insufficient global response to the crisis has sent stock markets to new lows. Commentators spoke of a possible rally given the low prices of stocks. Others opined about a theoretical floor for stock prices. The floor has fallen out from under the prices and waiting for a rally seems a fools errand. The corporate sector will be subjected to serious stress because of the mounting uncertainty in markets which has made it very difficult to attract investors. Markets are telling us that we should not hold our breath for a fast and painless recovery.
In other news, the world's savings is still pouring into the US market. Our public deficit will reach $1,750 bn this year. Leaving aside the debate about whether the stimulus/bailout will be enough to pull the US out of recession and prevent employment from plummeting, the budget defect will have an enormous effect on overall private investment in the US. Orthodox economics talks about a phenomenon called 'crowding out.' That is when an entity, in this case the state, is sucking up so much of the world's liquidity that there is very little left to lend to other actors. Lets clarify this phenomenon. US public debt (what the Gov borrows) is considered to be risk-free. Put simply, this is because investors assume that as long as the US exists, debts will be repaid. Because US national debt is risk-free it is also very cheep. Riskier borrowers must offer higher interest rates to lenders to attract liquidity. With the US asking for so much money from the private sector and from abroad, other more risky borrowers will find that there is less money floating around to be loaned to them and thus will be obligated to compete against other borrowers by raising interest rates. Some will get loans some won't. What's more is that a firm can only offer an interest rate as high the expected returns on their investments; i.e., profits must be sufficient to service (make payments on) that loan. That means firms will be forced out of the private debt market. Access to state financing will become very important. The final bit to mention about crowding out is that it is not only private sector firms that are crowded out of the market. Small states can be crowded out of the market as well. Look forward to more desperate demands for sovereign loans out of the developing world2.
Deficits and the global imbalances:
In the Financial Times on Jan. 2, it was revealed that US Treasury Secretary Hank Paulson sees "global imbalances" as the root cause of the present crisis. That is to say, the blame for this crisis was neither dishonesty or poor regulation but rather the underlying instability resulting from international trade--the massive inequality in rates of accumulation between exporting nations (China, Germany, Japan, Gulf States etc...) and debtor nations (US, UK, Spain etc...). The mechanisms that helped to propel the growth of such enormous bubbles in commodities and housing lie in the huge savings of the surplus nations. Those savings needed a place to go so they were put into financial markets in search of high rates of return (relative to the perceived risk of said investments). Those savings found their way into the pockets and homes of Americans and other OECDers. Savings also flowed, in a speculative fashion into commodities driving prices up3.
The planned stimulus to the US economy will exacerbate the current global imbalances. Unless the result of the stimulus is to depreciate the dollar and boost exports (a short term boost in exports is unlikely given the state of the global economy...) there will be little long-term economic benefits. To the extent that a large part of the stimulus could go to public goods (unemployment benefits, health care, infrastructure and education) the stimulus should be welcomed on basic human grounds but lets not be too optimistic about some sort of 'jump-start' to the economy as that is highly unlikely.
We should look out for international outcry about American spending and borrowing. In the long run we might expect the American policy to be a measured devaluation of the dollar. This might be the only way out of the crisis but it would spell one of the most monumental shifts in the post-war world and would thus be accompanied by major institutional and structural changes in the political-economic landscape4.
Footnotes:
1. Corresponding to VIX. A common measure of market volatility.
2. There is a strong historical relationship between private sector investment, employment and growth in capitalist economies.
3. This is not the whole story of the crisis. It is simply one level of it. A deeper understanding of the crisis must examine structural changes in production and exchange that gave rise to the imbalances but that is beyond the scope of my morning/afternoon.
4. What might be the fate Sino-American relations after a devaluation given the mass of dollars they have willingly accumulated? Could the dollar maintain its place as the worlds reserve currency?
Tuesday, March 3, 2009
Student Debt & The Obama Budget (Chloe) by Chloë
For many of us that are still students, we are semi-isolated from the financial crisis. We are though very familiar with the financial aid process that causes major head aches around this time of the year. Obama's new budget may change that.
The president is proposing an overhaul of the financial aid program, including nationalizing the lending process. Not surprisingly this will have a negative impact on lending institutions like Sallie Mae, but the plan is estimated to save the federal government 4 billion dollars. Along with saving the federal government money, the president is increasing the number of grants available to low income students and expanding eligibility to the federal loan program.
This though is a small step in terms of getting affordable education and many students will still be left with mounds of debt. It though signifies greater federal government involvement in higher education, letting us hope that free higher education will someday be a reality in the United States.
The president is proposing an overhaul of the financial aid program, including nationalizing the lending process. Not surprisingly this will have a negative impact on lending institutions like Sallie Mae, but the plan is estimated to save the federal government 4 billion dollars. Along with saving the federal government money, the president is increasing the number of grants available to low income students and expanding eligibility to the federal loan program.
This though is a small step in terms of getting affordable education and many students will still be left with mounds of debt. It though signifies greater federal government involvement in higher education, letting us hope that free higher education will someday be a reality in the United States.
Automation and the End of Capitalism (Jim) by der Augenblick
I wanted to write a quick addendum to Rob's post on Marshall Brain's talk about robotics and employment.
At the end of his talk Brain says the only logical plan of action given the inevitability of the massive unemployment (50 million people) and concentration of wealth that will result from full automation of labor in the next decade is to "restructure the economy" or "redesign society". Brain summarizes the way we should redesign society in four points:
To put the point bluntly, Brain describes communism. Notwithstanding some of the particularities given by various thinkers—Marx even remarks at one point that we will enjoy work under communism—communism has always involved two things: (1) the distribution of labor and the distribution of the product of labor is planned and not determined by the market, and (2) we are freed of the compulsory aspect of labor. The struggle against capitalism is a struggle against the imposition of labor. It is in most cases a struggle to get more use-values for less exchange-value or to get use-values without any exchange-value attached to them.
Same thing without the jargon: communism means everyone gets as much as possible by working as little as possible.
Clearly this was impossible under conditions of scarcity. Yet technologists, engineers, scientists, and inventors all seem to agree that we are fast approaching the point where scarcity will end—if we're not there already. The question is whether the scarcity we experience now and will experience in the future is the result of nature or whether it is the result of the unplanned system we live in. Brain argues that if we continue down the current path—letting market forces stand in for conscious decisions—this technology will hurt humanity, not benefit it. But if we make conscious, rational choices about how society as a whole ought to proceed with the implementation of this technology, it can benefit everyone. In fact, it is the only way it can benefit everyone and not hurt them. That is the first way in which Brain's solution negates the fundamentals of capitalism: he says we ought to bypass the market and make conscious, direct choices about the distribution of labor and the distribution of the fruits of labor in our society.
What he does not mention—and what I would emphasize—is that the ubiquity and growth of social networking technologies lays the foundation for total, conscious, decentralized, and democratic planning of the production process and the democratic distribution of the surplus-product. Communist planning in a technologically advanced world will neither resemble "administered", Soviet-style economies, nor will it reflect market forces. The current trajectory of the development of the productive forces makes this both possible and necessary.
The second way in which he bypasses capitalism is by raising the demand that we be "perpetually on vacation". He claims the only solution to the looming crisis—a crisis which we see now only in miniature—is to demand an end to the condition of forced labor. While it may appear as though capitalism is a system in which workers individually and voluntarily contract out their labor in exchange for a wage, the fact of the matter is that the working class as a whole is enslaved by the capitalist class as a whole. Every product of labor takes the commodity form. Unlike past civilizations, we do not even keep the means of subsistence. Therefore, in order to acquire access to the means of subsistence, we must work in exchange for a wage, and we exchange that wage for the means of subsistence. Money stands as the barrier between us and what we create. It is an indirect, abstract form of slavery, but it is a form of slavery nevertheless. We are not enslaved to any one particular individual; however, we are enslaved to the value-form itself. We cannot live except by working for another person, and our share of the product of labor is determined by unconscious, unplanned market forces.
But the demand for communism is the demand that we workers as a whole, rather than having to access the product of our labor only to the extent that the non-workers want us to, instead collectively have direct control over the product of our labor. This means that, as a society, we give of ourselves what we consent to give, and we take what it is reasonable to take. Given the inevitable conditions of superabundance of products approaching, the extent to which we can take approaches infinity. Given the inevitable, exponential rise in the productivity of labor, the amount of our labor we can consent to give approaches a value of zero.
We are fast approaching the point where if we do not meet anti-capitalist demands, the vast part of humanity will sink into misery. Brain demonstrates this in his talk. Yet we are approaching a point—just behind the first point—where the conditions that make capitalism possible will no longer exist. Moreover, we are creating the point where access to social wealth is necessarily decoupled from exertion. We are making necessary a transition from a liberal democratic society to a revolutionary democratic one.
At the end of his talk Brain says the only logical plan of action given the inevitability of the massive unemployment (50 million people) and concentration of wealth that will result from full automation of labor in the next decade is to "restructure the economy" or "redesign society". Brain summarizes the way we should redesign society in four points:
- Spread the benefits of productivity increases to everyone
- Break the concentration of wealth
- Increase pay
- Reduce the work week
To put the point bluntly, Brain describes communism. Notwithstanding some of the particularities given by various thinkers—Marx even remarks at one point that we will enjoy work under communism—communism has always involved two things: (1) the distribution of labor and the distribution of the product of labor is planned and not determined by the market, and (2) we are freed of the compulsory aspect of labor. The struggle against capitalism is a struggle against the imposition of labor. It is in most cases a struggle to get more use-values for less exchange-value or to get use-values without any exchange-value attached to them.
Same thing without the jargon: communism means everyone gets as much as possible by working as little as possible.
Clearly this was impossible under conditions of scarcity. Yet technologists, engineers, scientists, and inventors all seem to agree that we are fast approaching the point where scarcity will end—if we're not there already. The question is whether the scarcity we experience now and will experience in the future is the result of nature or whether it is the result of the unplanned system we live in. Brain argues that if we continue down the current path—letting market forces stand in for conscious decisions—this technology will hurt humanity, not benefit it. But if we make conscious, rational choices about how society as a whole ought to proceed with the implementation of this technology, it can benefit everyone. In fact, it is the only way it can benefit everyone and not hurt them. That is the first way in which Brain's solution negates the fundamentals of capitalism: he says we ought to bypass the market and make conscious, direct choices about the distribution of labor and the distribution of the fruits of labor in our society.
What he does not mention—and what I would emphasize—is that the ubiquity and growth of social networking technologies lays the foundation for total, conscious, decentralized, and democratic planning of the production process and the democratic distribution of the surplus-product. Communist planning in a technologically advanced world will neither resemble "administered", Soviet-style economies, nor will it reflect market forces. The current trajectory of the development of the productive forces makes this both possible and necessary.
The second way in which he bypasses capitalism is by raising the demand that we be "perpetually on vacation". He claims the only solution to the looming crisis—a crisis which we see now only in miniature—is to demand an end to the condition of forced labor. While it may appear as though capitalism is a system in which workers individually and voluntarily contract out their labor in exchange for a wage, the fact of the matter is that the working class as a whole is enslaved by the capitalist class as a whole. Every product of labor takes the commodity form. Unlike past civilizations, we do not even keep the means of subsistence. Therefore, in order to acquire access to the means of subsistence, we must work in exchange for a wage, and we exchange that wage for the means of subsistence. Money stands as the barrier between us and what we create. It is an indirect, abstract form of slavery, but it is a form of slavery nevertheless. We are not enslaved to any one particular individual; however, we are enslaved to the value-form itself. We cannot live except by working for another person, and our share of the product of labor is determined by unconscious, unplanned market forces.
But the demand for communism is the demand that we workers as a whole, rather than having to access the product of our labor only to the extent that the non-workers want us to, instead collectively have direct control over the product of our labor. This means that, as a society, we give of ourselves what we consent to give, and we take what it is reasonable to take. Given the inevitable conditions of superabundance of products approaching, the extent to which we can take approaches infinity. Given the inevitable, exponential rise in the productivity of labor, the amount of our labor we can consent to give approaches a value of zero.
We are fast approaching the point where if we do not meet anti-capitalist demands, the vast part of humanity will sink into misery. Brain demonstrates this in his talk. Yet we are approaching a point—just behind the first point—where the conditions that make capitalism possible will no longer exist. Moreover, we are creating the point where access to social wealth is necessarily decoupled from exertion. We are making necessary a transition from a liberal democratic society to a revolutionary democratic one.
Monday, March 2, 2009
How the Crash will Reshape America (Chloe) by Chloë
I've been neglecting to post this and during that time the Daily Kos picked up the article.
The original article can be found here. Definately worth a read if you are interested in how the economic crash will reshape the economic geography of the United States.
I will post some thoughts from Rob L in the comments.
The original article can be found here. Definately worth a read if you are interested in how the economic crash will reshape the economic geography of the United States.
I will post some thoughts from Rob L in the comments.
Banks to Card Debtors: Pay up now!!...Please??? (Brian) by Winston
The credit card biz used to love people with "a taste for credit" -- folks who kept high balances and more often than not paid barely above the minimum. But alas, the party is over. As the economy circles the toilet, credit card banks are reversing course -- offering incentives to pay off balances quickly so your debt balance is off their books like so many other "toxic assets." It's an interesting reversal of a long-standing policy that your balance was a good thing (I wrote about that policy a bit more indirectly here on this blog).
So why do we care? Well, they're in a panic. The banks don't know which way is up. A few weeks ago, the message was, "Buy stuff!!" Now it's, "OK - How can we make you go away?" It is times like these that a re-orientation of our relationship to debt and banks, like a debtors' union or a "bank strike," becomes more viable. The "cultural space" for (the popularization of) resistance is growing, if you will.
PS - By the way, as you might have figured out, "You are not your credit score!" rings truer because you can't even trust the accuracy of that score to begin with.
Thanks, capitalism - enjoy retirement.
So why do we care? Well, they're in a panic. The banks don't know which way is up. A few weeks ago, the message was, "Buy stuff!!" Now it's, "OK - How can we make you go away?" It is times like these that a re-orientation of our relationship to debt and banks, like a debtors' union or a "bank strike," becomes more viable. The "cultural space" for (the popularization of) resistance is growing, if you will.
PS - By the way, as you might have figured out, "You are not your credit score!" rings truer because you can't even trust the accuracy of that score to begin with.
Thanks, capitalism - enjoy retirement.
Wednesday, February 25, 2009
This goes out to all the Individual Responsibility trolls (Sam) by Dick Strongball
Here's a decent article from a HuffPo blogger and ex-financial regulator breaking down in general terms who bears the brunt of the ahem "responsibility" for defrauding the entire lending system. And...SURPRISE, any financial analyst with half-a-brain knew all this mortgage fraud and wholesale robbery of the banks by their owners was taking place, but were either knocked on the head by their greedy superiors or had their red flags ignored by, double-surprise, people in the Bush administration whose job was to police the industry.
In place of any common-sense regulation and denial of credit to people with bad credit histories, the banks were essentially given free-license to gouge non-prime lendees with higher fees and interest rates and package those nuggets of toxic fantasy wealth into resellable debt. Turnover was apparently so quick that even the loan files for these transactions seem to have been lost in the shuffle.
http://www.huffingtonpost.com/william-k-black/the-two-documents-everyon_b_169813.html
The time is past due. These banks and institutions require a stake through the heart. Our incremental overdependence on indebtedness to these vampires just for the right to live has to come to an end. I don't give a fuck if the gov grows; our new administration has to stop handing out welfare to the demon-gods of banking and start using that money to hire people to advance our infrastructure, science, health, education, and culture. It's time to start building REAL wealth in this country again, and for the first time in our history, give everyone a real shot at living quality lives.
In place of any common-sense regulation and denial of credit to people with bad credit histories, the banks were essentially given free-license to gouge non-prime lendees with higher fees and interest rates and package those nuggets of toxic fantasy wealth into resellable debt. Turnover was apparently so quick that even the loan files for these transactions seem to have been lost in the shuffle.
http://www.huffingtonpost.com/william-k-black/the-two-documents-everyon_b_169813.html
The time is past due. These banks and institutions require a stake through the heart. Our incremental overdependence on indebtedness to these vampires just for the right to live has to come to an end. I don't give a fuck if the gov grows; our new administration has to stop handing out welfare to the demon-gods of banking and start using that money to hire people to advance our infrastructure, science, health, education, and culture. It's time to start building REAL wealth in this country again, and for the first time in our history, give everyone a real shot at living quality lives.
Robots for Hire (Rob) by Rob L
While running through some research, this short talk jumped out from the Singularity Summit in 2008 on robotics and the coming economic shift pre-singularity. Marshall Brain (what a name for an AI researcher, just wow) relies mostly on labor statistics that are all fairly common knowledge to us. Using this data, however, he makes some interesting points about the 2000 - 04 recession, maintaining that IT replaced many jobs such as grocery clerks (a personal threat to yours truly), call desks, and travel agents. The resulting productive obsolescence of simple service jobs is a reduced exponential growth in global jobs contained within the economy. That trend continued ended up hobbling the uncharacteristically short recovery after 2004. In just a few years we hit another recession, where we sit now at the tip of the downswing.
Based on this, I feel it is important to consider that our present problems, while largely caused by debt, are concurrent with a deconstruction of our industrial economy and its transition into an information economy. This deconstruction has been long to build, itself an exponential process, but we are now past the knee of the curve. Is it possible then that the declining rate of profit is itself an exponential phenomenon?
The service sector which was touted to replace manufacturing and heavy industry is itself disappearing. This isn't all terrible, since these jobs are mostly held at below subsistence wages anyway. That is about as positive a spin you can wrap this in once it is also accepted just how broad sweeping these job losses will be.
The convergence of these forces, debt and obsolescence, among other factors, will result in a deep and long depression while the world economy adapts to the next paradigm. Brain's panic scenario hinges around the likelihood that nearly all service, transportation, and education jobs will be replaced by sufficiently functional robotics, resulting in 50 million jobs lost over the next 15 years. These people, Wallmart workers up to Fed-Ex drivers, are already at or just above poverty. They have little access and even less support for the education and loans necessary to enter the creative class. While 50 million may be excessive, even a significantly smaller percentage would be catastrophic to existing economic structures.
At the same time, the rest of the world is catching up to our productivity, i. e., "the world is flat/spiky". IT is transforming Africa, South America, and the rest of the world at an amazing yet welcomed rate. The potential here is the realization of our dream. Massive efficiency in production can allow for a fractional work week, material equality, etc. But without major preparation and the incentive, political or otherwise, to assist the poor in their own transition, this dream seems improbable.
However the transition is navigated, exponential learning continues. We run smack into the singularity just as we recover our footing, if we do at all. I postulate that we must be standing as equals in at that moment, or we will fail to singularize as a species. The dynamic between rich and poor will mutate into a new dynamic between smart and left behind.
Based on this, I feel it is important to consider that our present problems, while largely caused by debt, are concurrent with a deconstruction of our industrial economy and its transition into an information economy. This deconstruction has been long to build, itself an exponential process, but we are now past the knee of the curve. Is it possible then that the declining rate of profit is itself an exponential phenomenon?
The service sector which was touted to replace manufacturing and heavy industry is itself disappearing. This isn't all terrible, since these jobs are mostly held at below subsistence wages anyway. That is about as positive a spin you can wrap this in once it is also accepted just how broad sweeping these job losses will be.
The convergence of these forces, debt and obsolescence, among other factors, will result in a deep and long depression while the world economy adapts to the next paradigm. Brain's panic scenario hinges around the likelihood that nearly all service, transportation, and education jobs will be replaced by sufficiently functional robotics, resulting in 50 million jobs lost over the next 15 years. These people, Wallmart workers up to Fed-Ex drivers, are already at or just above poverty. They have little access and even less support for the education and loans necessary to enter the creative class. While 50 million may be excessive, even a significantly smaller percentage would be catastrophic to existing economic structures.
At the same time, the rest of the world is catching up to our productivity, i. e., "the world is flat/spiky". IT is transforming Africa, South America, and the rest of the world at an amazing yet welcomed rate. The potential here is the realization of our dream. Massive efficiency in production can allow for a fractional work week, material equality, etc. But without major preparation and the incentive, political or otherwise, to assist the poor in their own transition, this dream seems improbable.
However the transition is navigated, exponential learning continues. We run smack into the singularity just as we recover our footing, if we do at all. I postulate that we must be standing as equals in at that moment, or we will fail to singularize as a species. The dynamic between rich and poor will mutate into a new dynamic between smart and left behind.
Tuesday, February 24, 2009
Thursday, February 19, 2009
Tuesday, February 17, 2009
"Busted" Approach? (Brian) by Winston
So I used to read a lot of Adbusters back in the day. It got kind of stale and repetetive. It still has some very informative and interesting pieces (and I learned the word "meme" from them before pundits now used it), but I mentally associate it more with an anarchist/black block kind of vibe or a subversive-art vibe (I don't have an artisitic bone in my body, so there's only so much accessibility there, ya know??). I still get email updates from their "culture jammer" communiques.
Issue #82 is out - Endgame Strategies. In the email highlighting the issue's features, I noticed this:
Revolutionary Potential: Editor-in-Chief, Kalle Lasn, probes the latent potential for a replay of 60s-style insurrection in the streets of North America. Will Generation O rise to the challenge of the times?
They just don't get it, do they? Why do we need to look backwards? (I don't want to start a thread of comments about the 60s - I think this blog and the movement have done a good job parsing out what to take from the 60s and what to leave behind or make anew) Why do we need some "insurrection"? I mean, my rage mojo is trigger-happy these days - some days I wanna take to the streets and throw Molotov cocktails all over...but does that create one more shred of democracy?? And I love a good march, but they need to be productive, not just polemical. Not to mention, street actions and many other 60s products were made for photojournalism and, to a greater degree, television. We now live in, for lack of a less-hackneyed phrase, the "digital age." No offense to Mr. Lasn, whom I respect, but I think "rising to the challenge" encompasses a lot more useful activities than getting turned back at the Pentagon or bustin' up some more Starbucks...
However, in the one piece released online thus far, David Graeber takes a less Adbusters-as-usual approach. It's a decent read. He plays with some terms more loosely than some pirates here might, and the stroke is broad -- but I'd like to hear what you guys think about his column. The intro paragraph, to whet your appetities:
We have reached an impasse. Capitalism as we know it is coming apart at the seams. But as financial institutions stagger and crumble, there is no obvious alternative. Organized resistance is scattered and incoherent. The global justice movement is a shadow of its former self. For the simple reason that it’s impossible to maintain perpetual growth on a finite planet, it’s possible that in a generation or so capitalism will no longer exist. Faced with this prospect, people’s knee-jerk reaction is often fear. They cling to capitalism because they can’t imagine a better alternative.
Issue #82 is out - Endgame Strategies. In the email highlighting the issue's features, I noticed this:
Revolutionary Potential: Editor-in-Chief, Kalle Lasn, probes the latent potential for a replay of 60s-style insurrection in the streets of North America. Will Generation O rise to the challenge of the times?
They just don't get it, do they? Why do we need to look backwards? (I don't want to start a thread of comments about the 60s - I think this blog and the movement have done a good job parsing out what to take from the 60s and what to leave behind or make anew) Why do we need some "insurrection"? I mean, my rage mojo is trigger-happy these days - some days I wanna take to the streets and throw Molotov cocktails all over...but does that create one more shred of democracy?? And I love a good march, but they need to be productive, not just polemical. Not to mention, street actions and many other 60s products were made for photojournalism and, to a greater degree, television. We now live in, for lack of a less-hackneyed phrase, the "digital age." No offense to Mr. Lasn, whom I respect, but I think "rising to the challenge" encompasses a lot more useful activities than getting turned back at the Pentagon or bustin' up some more Starbucks...
However, in the one piece released online thus far, David Graeber takes a less Adbusters-as-usual approach. It's a decent read. He plays with some terms more loosely than some pirates here might, and the stroke is broad -- but I'd like to hear what you guys think about his column. The intro paragraph, to whet your appetities:
We have reached an impasse. Capitalism as we know it is coming apart at the seams. But as financial institutions stagger and crumble, there is no obvious alternative. Organized resistance is scattered and incoherent. The global justice movement is a shadow of its former self. For the simple reason that it’s impossible to maintain perpetual growth on a finite planet, it’s possible that in a generation or so capitalism will no longer exist. Faced with this prospect, people’s knee-jerk reaction is often fear. They cling to capitalism because they can’t imagine a better alternative.
Monday, February 16, 2009
the banks are made of marble/with a guard at every door...(Brian) by Winston
...and their vaults are stuffed with silver/that the [teachers] sweated for...
upon Keith's suggestion, and in the spirit of collecting these stories as we build toward more analysis and the debtors' union, below is the text of an email I sent some fellow-travelling victims of profit motive:
So I needed to open up a "summer savings" account. Watchung did it for me at a bank that had no minimum balance (I guess they had a deal w/the bank). Montclair is so big, ya gotta do it yourself - they can't run accounts for all the employees who'd want one. Problem is, I need an account w/a low mandatory minimum balance - I clear the sucker out pretty much by late August and can't do penalties. So me and Jones go to Chase today - they were open on Presidents' Day and are in walking distance, so they got our buisness. Basically, all we wanted was a "tuck my money away so I don't spend it" account for when the summer comes. As we discussed not being able to handle the $300 minimum balance - honestly, I can't see that happening by late August - and having no need for another checking account (they like to "package" accounts), you could smell the poverty, and the conversation had this awkward, talk-in-circles, stunted kind of vibe....I thought we'd leave in search of a better po' folks' bank...
So the guy says in passing that if I had an existing relationship with Chase, he might have other things I could do. I have a credit card with Chase - I could go on for hours about cards and debt, but suffice it to say I did some dumb things in my desperate youth and I rarely use the thing now and make payments barely above the minimum - just what they love - the business calls it "a taste for credit" - they call people who pay balances "deadbeats"... Well, this guy takes one look at my roughly $17,000 card balance and says, in unison with his partner , "That changes everything." Yeah, you're telling me - it's been changing things for me for a long time....So basically, I can bundle accounts together that have an average total daily balance of $5000 (we held off on the $15,000 in case I get some windfall and pay off two grand of debt)...that's right - for those of us with little cash flow, we can keep basically nothing in both the checking and savings account, as long as we keep the card balance above $5000 - it's a disincentive to get out of debt. I wasn't shocked, but I have to admit there are few days that debt can ever be spun into something positive. Incidentally, the checking-savings connection is good to have because the feds have electronic transaction limits on savings accounts - a deterrant to using savings like a checking account - i.e. an incentive to keep your damn money in the banks and open up more accounts.
And one more - picture this: Chase Bank, the only bank in town open on a holiday, with a sign out front giving away $100 if you open a checking account w/$100 (that goes untouched for 30 days) today only...how long until these guys are working Sundays with carnival barkers outside???
I feel good - I did my part to help save capitalism today... B
PS - not to seem overly simplistic in one's analysis, but it seems to me the ____s that caused this mess need to be giving us the keys to the place, not some $100 bait...
PPS - from a race/gender/class perspective: as I watched the execs get ummm... "grilled" (ha!) by Congress, I thought to myself I'm lucky (i.e. I have the privilege) no one judges the conduct of all white males based on these guys' actions...could you imagine if a small group of say, black women, were responsible for this crisis??
PPPS - I have a relative in financial - he says these guys are DESPERATE and at least partial nationalization is pretty much a done deal before the end of 2009 (he also says he'd get his own branch from Chase if they used HIS card balance as the guide, but that's another story...)
upon Keith's suggestion, and in the spirit of collecting these stories as we build toward more analysis and the debtors' union, below is the text of an email I sent some fellow-travelling victims of profit motive:
So I needed to open up a "summer savings" account. Watchung did it for me at a bank that had no minimum balance (I guess they had a deal w/the bank). Montclair is so big, ya gotta do it yourself - they can't run accounts for all the employees who'd want one. Problem is, I need an account w/a low mandatory minimum balance - I clear the sucker out pretty much by late August and can't do penalties. So me and Jones go to Chase today - they were open on Presidents' Day and are in walking distance, so they got our buisness. Basically, all we wanted was a "tuck my money away so I don't spend it" account for when the summer comes. As we discussed not being able to handle the $300 minimum balance - honestly, I can't see that happening by late August - and having no need for another checking account (they like to "package" accounts), you could smell the poverty, and the conversation had this awkward, talk-in-circles, stunted kind of vibe....I thought we'd leave in search of a better po' folks' bank...
So the guy says in passing that if I had an existing relationship with Chase, he might have other things I could do. I have a credit card with Chase - I could go on for hours about cards and debt, but suffice it to say I did some dumb things in my desperate youth and I rarely use the thing now and make payments barely above the minimum - just what they love - the business calls it "a taste for credit" - they call people who pay balances "deadbeats"... Well, this guy takes one look at my roughly $17,000 card balance and says, in unison with his partner , "That changes everything." Yeah, you're telling me - it's been changing things for me for a long time....So basically, I can bundle accounts together that have an average total daily balance of $5000 (we held off on the $15,000 in case I get some windfall and pay off two grand of debt)...that's right - for those of us with little cash flow, we can keep basically nothing in both the checking and savings account, as long as we keep the card balance above $5000 - it's a disincentive to get out of debt. I wasn't shocked, but I have to admit there are few days that debt can ever be spun into something positive. Incidentally, the checking-savings connection is good to have because the feds have electronic transaction limits on savings accounts - a deterrant to using savings like a checking account - i.e. an incentive to keep your damn money in the banks and open up more accounts.
And one more - picture this: Chase Bank, the only bank in town open on a holiday, with a sign out front giving away $100 if you open a checking account w/$100 (that goes untouched for 30 days) today only...how long until these guys are working Sundays with carnival barkers outside???
I feel good - I did my part to help save capitalism today... B
PS - not to seem overly simplistic in one's analysis, but it seems to me the ____s that caused this mess need to be giving us the keys to the place, not some $100 bait...
PPS - from a race/gender/class perspective: as I watched the execs get ummm... "grilled" (ha!) by Congress, I thought to myself I'm lucky (i.e. I have the privilege) no one judges the conduct of all white males based on these guys' actions...could you imagine if a small group of say, black women, were responsible for this crisis??
PPPS - I have a relative in financial - he says these guys are DESPERATE and at least partial nationalization is pretty much a done deal before the end of 2009 (he also says he'd get his own branch from Chase if they used HIS card balance as the guide, but that's another story...)
Friday, February 13, 2009
Bank of America - Class Action Lawsuit (Jim) by der Augenblick
Bank of America has settled a class action lawsuit over its dirty overdraft trick: things like approving transactions that generate overdraft fees, for example, or clearing transactions in high-to-low order to increase the number of overdrafts. If you're a former customer of BoA, Fleet, LaSalle Bank or United Trust Company, you can claim your part of the settlement fund.
Here's a direct link to the lawsuit website where you can register. If the class action lawsuit is approved over the summer, you could receive $78.
Folks, we take too much of the shitty treatment of these institutions for granted. It's bad enough that we're forced to work for the capitalist class in order to acquire the money to purchase the means of subsistence. It's bad enough that they steal wealth from us left and right. And on top of this, they also charge us to use our own money and utilize every sneaky, underhanded practice they can to steal from us in addition to that.
Overdraft fees are not a punishment for irresponsible consumption. They are a hole the finance capitalist class digs for us and toward which they push us. It's not the principal way they make their money. It's just a gratuitous way they can laugh in our faces while they keep their feet on our throats.
We need not only to demand they end these degrading, humiliating practices. We need to demand these people, this class, no longer exist. They produce nothing. They only take. They get bailed out at our expense. They have no right to exist. They should not only not be bailed out. They should be eliminated. They infuriate me. I hate them.
P.S. - If you have an account with them, you get to go to museums for free the first weekend of every month. Milk em for it. But what we really need is a Museum of the Past, a museum where children and adults can go and look at dioramas of bank lobbies, where they can press buttons and hear recordings of frustrating phone conversations between patients and HMOs, and where they can look in glass cases and see greasy samples of the worthless pieces of metal and paper that once stood as a barrier between whole of humanity and the product of its blood and sweat.
Here's a direct link to the lawsuit website where you can register. If the class action lawsuit is approved over the summer, you could receive $78.
Folks, we take too much of the shitty treatment of these institutions for granted. It's bad enough that we're forced to work for the capitalist class in order to acquire the money to purchase the means of subsistence. It's bad enough that they steal wealth from us left and right. And on top of this, they also charge us to use our own money and utilize every sneaky, underhanded practice they can to steal from us in addition to that.
Overdraft fees are not a punishment for irresponsible consumption. They are a hole the finance capitalist class digs for us and toward which they push us. It's not the principal way they make their money. It's just a gratuitous way they can laugh in our faces while they keep their feet on our throats.
We need not only to demand they end these degrading, humiliating practices. We need to demand these people, this class, no longer exist. They produce nothing. They only take. They get bailed out at our expense. They have no right to exist. They should not only not be bailed out. They should be eliminated. They infuriate me. I hate them.
P.S. - If you have an account with them, you get to go to museums for free the first weekend of every month. Milk em for it. But what we really need is a Museum of the Past, a museum where children and adults can go and look at dioramas of bank lobbies, where they can press buttons and hear recordings of frustrating phone conversations between patients and HMOs, and where they can look in glass cases and see greasy samples of the worthless pieces of metal and paper that once stood as a barrier between whole of humanity and the product of its blood and sweat.
Settling the Debt: Business Week Starts to Point Out the Obvious (X.) by X.
Check out the Business Week article below that lays the blame and responsibility for the massive debt crisis at the feet of the banks and real estate speculators. That the corporate interests that run Business Week decided to run an article that advocates massive debt write-offs at the banks' expense is a significant development. There is dissension in the ranks of capital. Big business wants this crisis to come to a resolution because it is losing untold billions. Some of the big capitalists are losing their patience with the banking industry's stalling tactics and spelling it out: Take your medicine. What is lacking here is bold mass revolutionary democratic organization of the debtors to force the banks to eat ALL of their debt (rather than passing most of it off to the taxpayers) and to use all available means to force a resolution of the looming consumer debt crisis in favor of the producers of wealth (you know, the workers).
This is the kind of information needed on a website hub in a campaign to build Keith's proposed debtors' union, along with articles on available means of resistance to the banks and credit card companies, stories of successful dual power organizing to stop evictions, company closures, etc. and exposures of the sickening decadence of the rich in the midst of this crisis (using government bailout funds to pay for exotic holidays and to give million dollar bonuses to execs).
Here are the first graphs of the Business Week article:
"The bad mortgages that got the current financial crisis started have produced a terrifying wave of home foreclosures. Unless the foreclosure surge eases, even the most extravagant federal stimulus spending won't spur an economic recovery."
"The Obama Administration is expected within the next few weeks to announce an initiative of $50 billion or more to help strapped homeowners. But with 1 million residences having fallen into foreclosure since 2006, and an additional 5.9 million expected over the next four years, the Obama plan -- whatever its details -- can't possibly do the job by itself. Lenders and investors will have to acknowledge huge losses and figure out how to keep recession-wracked borrowers making at least some monthly payments."
"So far the industry hasn't shown that kind of foresight. One reason foreclosures are so rampant is that banks and their advocates in Washington have delayed, diluted, and obstructed attempts to address the problem. Industry lobbyists are still at it today, working overtime to whittle down legislation backed by President Obama that would give bankruptcy courts the authority to shrink mortgage debt. Lobbyists say they will fight to restrict the types of loans the bankruptcy proposal covers and new powers granted to judges."
"The industry strategy all along has been to buy time and thwart regulation, financial-services lobbyists tell BusinessWeek . "We were like the Dutch boy with his finger in the dike," says one business advocate who, like several colleagues, insists on anonymity, fearing career damage. Some admit that, in retrospect, their clients, which include Bank of America (NYSE:BAC - News), Citigroup (NYSE:C - News), and JPMorgan Chase (NYSE:JPM - News), would have been better off had they agreed two years ago to address foreclosures systematically rather than pin their hopes on an unlikely housing rebound".
Read the whole article here.
PS: Where is the traditional US Left on this question? In the wilderness of irrelevant protest or pathetic lobbying as always...
This is the kind of information needed on a website hub in a campaign to build Keith's proposed debtors' union, along with articles on available means of resistance to the banks and credit card companies, stories of successful dual power organizing to stop evictions, company closures, etc. and exposures of the sickening decadence of the rich in the midst of this crisis (using government bailout funds to pay for exotic holidays and to give million dollar bonuses to execs).
Here are the first graphs of the Business Week article:
"The bad mortgages that got the current financial crisis started have produced a terrifying wave of home foreclosures. Unless the foreclosure surge eases, even the most extravagant federal stimulus spending won't spur an economic recovery."
"The Obama Administration is expected within the next few weeks to announce an initiative of $50 billion or more to help strapped homeowners. But with 1 million residences having fallen into foreclosure since 2006, and an additional 5.9 million expected over the next four years, the Obama plan -- whatever its details -- can't possibly do the job by itself. Lenders and investors will have to acknowledge huge losses and figure out how to keep recession-wracked borrowers making at least some monthly payments."
"So far the industry hasn't shown that kind of foresight. One reason foreclosures are so rampant is that banks and their advocates in Washington have delayed, diluted, and obstructed attempts to address the problem. Industry lobbyists are still at it today, working overtime to whittle down legislation backed by President Obama that would give bankruptcy courts the authority to shrink mortgage debt. Lobbyists say they will fight to restrict the types of loans the bankruptcy proposal covers and new powers granted to judges."
"The industry strategy all along has been to buy time and thwart regulation, financial-services lobbyists tell BusinessWeek . "We were like the Dutch boy with his finger in the dike," says one business advocate who, like several colleagues, insists on anonymity, fearing career damage. Some admit that, in retrospect, their clients, which include Bank of America (NYSE:BAC - News), Citigroup (NYSE:C - News), and JPMorgan Chase (NYSE:JPM - News), would have been better off had they agreed two years ago to address foreclosures systematically rather than pin their hopes on an unlikely housing rebound".
Read the whole article here.
PS: Where is the traditional US Left on this question? In the wilderness of irrelevant protest or pathetic lobbying as always...
Thursday, February 12, 2009
Settling the Debt: Who's fighting Over What and What We Can Do About It (X.) by X.
Picture yourself sitting at a huge table of diners in a restaurant. A small group of bankers, big stockholders and corporate execs feasted on champaign and caviar all night. The rest of us got anything from half a sandwich to a couple of peas. Now here comes the check and it's a huge one. The bankers and their stock-holding buddies owe most of the bill. But they don't want to pay up. And since they know the owner, they're trying to work out a deal under which they go home while the rest of us go wash dishes in the kitchen... for the next 10 years.
As Keith points out in his bold proposal to build a debtors' union, the resolution of the current global economic crisis requires that someone take a big loss. And since no one wants to take a big loss, all the economic players in the game (classes) are doing all they can to avoid paying up. The frenzied speculation that set off the financial collapse created fictitious value for years (e.g. houses that were worth $300,000 were valued and sold at $500,000 because speculators counted on house prices to keep going up forever). Now banks, hedge funds, mutual funds, etc. are sitting on a lot of IOUs that will never be paid back (e.g. impossibly high mortgages that broke homeowners cannot repay).
The rest of big business can't get loans from the collapsing banking system to finance their upcoming projects (big business always finances future projects with borrowed money since sitting on huge sums of money is not profitable). As the crisis deepens these businesses can't get new orders for whatever they're producing (whether goods like machinery, cars, etc. or services like entertainment, health care, etc.) and start to cut down production to remain profitable, which means laying off masses of workers. The workers -the rest of us- are on average buried in personal debt that we accumulated when we borrowed from the banks (credit cards, loans) to make up for our declining real wages which the big stockholders slashed over the past decades in their desperate attempt to maintain huge profit margins (see the instructive posts by Keith and Jim for their take on Marx's explanation of the declining rate of profit).
As the economic crisis continues to deepen, the following questions become more urgent every day:
-Who will get stuck with how much of the bill?
-How much worse will the ongoing depression get before the debt question is settled?
What the traditional media pundits won't discuss is that the answers to these two questions depend on two other questions:
-Who are the economic players (classes) in the 21st century economy and how are they being impacted by the current crisis?
-Which of these economic players (classes) will successfully unite to safeguard their interests at the expense of the others?
For Revolutionary Democracy, the key is to figure out how to unite as many of the progressive economic players (classes) around a concrete plan of action to force the banking and corporate players to assume responsibility for the debt caused by the capitalist system (of which they are the greatest beneficiaries and defenders).
Keith's proposal to build a debtors' union provides us with much-needed dual power strategic direction. A united front of the working classes (from the factory to the office) and small business allies capable of launching a general debt strike could force the financial and corporate powers-that-be to renegotiate consumer debt on a mass scale (a modern Jubilee as Keith points out, which we need to evangelize among progressive Christians!). A massive consumer debt settlement in turn would jump-start the economy by returning to the workers the buying power they are due (e.g. when you get your check, you can actually spend some of it and save some of it, rather than giving a huge chunk of it to the banks for your credit card bills, mortgage, etc.)
The task at hand is to flesh out the debtors' union strategic proposal (which classes would unite most readily and why) and to develop a tactical project plan (how do we go about uniting these classes in a debtors' union). Specifically, we need to:
-Analyze the current economic situation more thoroughly with the express purpose of identifying each economic player, its relationship to the 21st century economy production process and how it is currently being impacted by the crisis. For example, what is the difference between struggling old economy capitalists (auto, steel, textiles, etc.) and new economy capitalists (internet, green energy, etc.). Which ones will come out of the current crisis stronger, which ones weaker? Also, who owes how much? What is the debt burden of the average student? blue-collar family? white-collar family? Etc.
-Develop concrete action proposals with achievable short-term goals that can help people grasp the revolutionary potential of a debtors' union. While we must broadcast the debtors' union and general debt strike idea in its full boldness, we must recognize it as a long-term goal (which could become relevant sooner than later should the economic situation deteriorate quickly). In the meantime, we could start researching and broadcasting all tactics available to people to resist the banks when facing foreclosure, rising interest rates, etc. We could also document and promote all instances of collective, organized resistance such as the recent Chicago sit-down strike, reviving the old Unemployment Committees of the 30's that prevented evictions in their neighborhoods, etc. A website fully dedicated to this task -updated frequently and radically open to mass participation- could serve as an early organizing hub that progressively demonstrates what a debtors' union could do in the real world.
Sounds like a good project for an ambitious Rev Dem study circle to take up at this point in time...
As Keith points out in his bold proposal to build a debtors' union, the resolution of the current global economic crisis requires that someone take a big loss. And since no one wants to take a big loss, all the economic players in the game (classes) are doing all they can to avoid paying up. The frenzied speculation that set off the financial collapse created fictitious value for years (e.g. houses that were worth $300,000 were valued and sold at $500,000 because speculators counted on house prices to keep going up forever). Now banks, hedge funds, mutual funds, etc. are sitting on a lot of IOUs that will never be paid back (e.g. impossibly high mortgages that broke homeowners cannot repay).
The rest of big business can't get loans from the collapsing banking system to finance their upcoming projects (big business always finances future projects with borrowed money since sitting on huge sums of money is not profitable). As the crisis deepens these businesses can't get new orders for whatever they're producing (whether goods like machinery, cars, etc. or services like entertainment, health care, etc.) and start to cut down production to remain profitable, which means laying off masses of workers. The workers -the rest of us- are on average buried in personal debt that we accumulated when we borrowed from the banks (credit cards, loans) to make up for our declining real wages which the big stockholders slashed over the past decades in their desperate attempt to maintain huge profit margins (see the instructive posts by Keith and Jim for their take on Marx's explanation of the declining rate of profit).
As the economic crisis continues to deepen, the following questions become more urgent every day:
-Who will get stuck with how much of the bill?
-How much worse will the ongoing depression get before the debt question is settled?
What the traditional media pundits won't discuss is that the answers to these two questions depend on two other questions:
-Who are the economic players (classes) in the 21st century economy and how are they being impacted by the current crisis?
-Which of these economic players (classes) will successfully unite to safeguard their interests at the expense of the others?
For Revolutionary Democracy, the key is to figure out how to unite as many of the progressive economic players (classes) around a concrete plan of action to force the banking and corporate players to assume responsibility for the debt caused by the capitalist system (of which they are the greatest beneficiaries and defenders).
Keith's proposal to build a debtors' union provides us with much-needed dual power strategic direction. A united front of the working classes (from the factory to the office) and small business allies capable of launching a general debt strike could force the financial and corporate powers-that-be to renegotiate consumer debt on a mass scale (a modern Jubilee as Keith points out, which we need to evangelize among progressive Christians!). A massive consumer debt settlement in turn would jump-start the economy by returning to the workers the buying power they are due (e.g. when you get your check, you can actually spend some of it and save some of it, rather than giving a huge chunk of it to the banks for your credit card bills, mortgage, etc.)
The task at hand is to flesh out the debtors' union strategic proposal (which classes would unite most readily and why) and to develop a tactical project plan (how do we go about uniting these classes in a debtors' union). Specifically, we need to:
-Analyze the current economic situation more thoroughly with the express purpose of identifying each economic player, its relationship to the 21st century economy production process and how it is currently being impacted by the crisis. For example, what is the difference between struggling old economy capitalists (auto, steel, textiles, etc.) and new economy capitalists (internet, green energy, etc.). Which ones will come out of the current crisis stronger, which ones weaker? Also, who owes how much? What is the debt burden of the average student? blue-collar family? white-collar family? Etc.
-Develop concrete action proposals with achievable short-term goals that can help people grasp the revolutionary potential of a debtors' union. While we must broadcast the debtors' union and general debt strike idea in its full boldness, we must recognize it as a long-term goal (which could become relevant sooner than later should the economic situation deteriorate quickly). In the meantime, we could start researching and broadcasting all tactics available to people to resist the banks when facing foreclosure, rising interest rates, etc. We could also document and promote all instances of collective, organized resistance such as the recent Chicago sit-down strike, reviving the old Unemployment Committees of the 30's that prevented evictions in their neighborhoods, etc. A website fully dedicated to this task -updated frequently and radically open to mass participation- could serve as an early organizing hub that progressively demonstrates what a debtors' union could do in the real world.
Sounds like a good project for an ambitious Rev Dem study circle to take up at this point in time...
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