Gowan’s latest
CRISIS IN THE HEARTLAND
Consequences of the New Wall Street System
The long credit crunch that began in the Atlantic world in August 2007 is strange in its extraordinary scope and intensity. Mainstream discourse, referring to a ‘sub-prime’ crisis, implies that the credit crunch has been caused, rather than triggered, by a bubble in the real economy. This is at best naïve: after all, the bursting of an equally large bubble in the Spanish housing market led to no such blow-out in the domestic banking system. The notion that falling house prices could shut down half of all lending in the us economy within a matter of months—and not just mortgages, but car loans, credit-card receivables, commercial paper, commercial property and corporate debt—makes no sense. In quantitative terms this amounted to a credit shrinkage of about $24 trillion dollars, nearly double usgdp. Erstwhile lenders were soon running not just from sub-prime securities but from the supposedly safest debt of all, the ‘super senior’ category, whose price by the end of 2007 was a tenth of what it had been just a year before.
An understanding of the credit crunch requires us to transcend the commonsense idea that changes in the so-called real economy drive outcomes in a supposed financial superstructure. Making this ‘epistemological break’ is not easy. One reason why so few economists saw a crisis coming, or… FULL AT NEW LEFT REVIEW
ld:
I just read Gowan’s piece from start to finish. It’s very good. One thing I like about Gowan is that, as an ex-Trot, he has a very savvy institutional analysis of (what he calls) the New Wall Street, and he does not fall back on simpleton nostrums (as does John Bellamy Foster whenever the creative juices dry up) that highly leveraged bubble blowing is nothing more than diversion of capital from a stagnating productive circuit. That latter line is so annoyingly preschool ABC’s and I appreciate that Gowan can be a Marxist (of sorts) and see things as much more complex and contingent.
7 March 2009, 9:11 pmStan:
from Larry Damms:
8 March 2009, 7:07 amStan:
I am very gratified that someone has taken the time to read Gowan’s theses. I’d be interested to hear in more detail what you think about the book.
8 March 2009, 12:08 pmStan:
FULL
17 March 2009, 5:42 amStan:
and from Harvey on accumulaton through dispossession — an escalating practice of exterminism:
FULL
It’s sad and remarkable — with his excellent dissections — that Harvey still doesn’t get relocalization… as strategy and adaptation.
17 March 2009, 6:08 amStan:
Hudson’s latest and Whitney’s… CP is on this.
18 March 2009, 7:55 pmpeggy:
In case you haven’t seen this
http://www.alternet.org/democracy/132862/the_voters%27_uprising%3A_president_obama_what_are_you_thinking/
26 March 2009, 9:02 pmDeAnander:
Eurotrib Diary on dissident economist Gunnar Tomasson who lays out what he sees as the fundamental logical error in neoclassical economics and hence in finance capitalism…
I would put it a bit differently from Tomasson, who still seems to see wealth in terms of “production” i.e. the human manipulation of found objects — rather than in the inherent value and suitability of the objects found… such as food, topsoil, trees, etc. This “labour theory of value” seems utterly ludicrous in view of the degree to which the viability of an entire planetary-scale ecosystem has been degraded — utterly impoverished and *de*valued — by the clever antics of us labouring, diligent, self-congratulatory monkeys.
Still, it is good to see a “credentialled” (ugh!) economist saying loudly and clearly that the Emperor is not only buck-naked but drunk as a skunk.
As to “they [bankers and captains of industry] are consolidating their class power” — everyone and her cousin are quoting Matt Taibbi’s Rolling Stone article: The Big Takeover — worth a read to get a sense of class consciousness slowly, very late, very reluctantly, creeping onto the mainstream American radar!
27 March 2009, 1:04 pmHenry:
I believe there is something profoundly wrong in this statement: “…to see wealth in terms of “production” i.e. the human manipulation of found objects — rather than in the inherent value and suitability of the objects found… such as food, topsoil, trees, etc. This “labour theory of value” seems utterly ludicrous in view of the degree to which the viability of an entire planetary-scale ecosystem has been degraded — utterly impoverished and *de*valued — by the clever antics of us labouring, diligent, self-congratulatory monkeys.”
The gifts of nature are not wealth in the same sense as that which is produced by human activity. A forest is one thing, and a house is another. It is a matter of carefully defining words, as well as the standpoint adopted, which in this case is that of economics. There is nothing inherently wrong in the notion that value–for human beings–is added to something by a given human productive activity. Production need not mean useless or baneful production, or industrial production, just as farming need not mean industrialized farming. Economic thinking is clouded by just such passion-laden use of words, which tends to throw babies out with bath water. Also, no good is served by reducing humans to monkeys. Again, one has the impression that the phrase is the vehicle of the author’s frustrations or impassioned state of mind rather than the vehicle of a truth or insight. This serves no one.
Not everyone is a Darwinian, and not every non-Darwinian is a fundamentalist of a primitive fanatical type. If Christ, Buddha, Lao Tze, Shankaracharya, Muhammad and, in short, an innumerable host of noble, sagely, and spiritual men–the best of men, actually–were not believers in the Darwinian theory of man’s descent, the least we can do is respect their point of view. Instead, we can understand that “to err is human.” The task, therefore is clarify the errors, elucidate the principles, and point the way out of the error. Unquestionably, the purely materialistic view of life, the modern industrial system, and the essentially unjust monetary system are all instances of serious errors. Many, many, people have written eloquently about this.
27 March 2009, 5:22 pmJames M:
Matt Taibbi’s Rolling Stone article: The Big Takeover — worth a read to get a sense of class consciousness slowly, very late, very reluctantly, creeping onto the mainstream American radar!
Worth a read, I agree … too bad it’s such a painful one, being filled with tiresome obnoxious macho-speak. It’s really the prime exemplar of a trend in internet writing, particularly: Throw in lots of unquestioned gendered epithets, tough-guy talk, and profanity into an otherwise fairly mundane essay, and magically it becomes “edgy” … and twentysomething boys of the kind that rule sites like digg.com will link to you like crazy.
Fwiw, I’ve been getting a good education on the very basics of finance capital – something I’ve wanted for a long time – at this website which hosts videos of ivy league college lectures on various subjects. This one and this series have helped demystify the concepts quite a bit. Again, very basic, and taught by apologists for the system, of course.
28 March 2009, 1:10 pmDeAnander:
Worth a read, I agree … too bad it’s such a painful one, being filled with tiresome obnoxious macho-speak.
well, that’s Rolling Stone for ya, consistently — the magazine for forty year old men who still think (emotionally speaking) like twenty-something boys~!
28 March 2009, 11:16 pmDeAnander:
All these persons were born, lived, and died long before Darwin published, so we have no idea what they would have thought of his work had they been able to read and understand it. I have the greatest respect for the moral intelligence of many a person who was — in keeping with the intellectual and technological resources of his/her era — ignorant of the theory of electromagnetics, Keplerian astronomy, the laws of thermodynamics, any accurate means of measuring energy density of fuels, etc; this in no way invalidates the discoveries of the intervening generations or their importance to our understanding of our present predicament. It is not imho necessary to respect e.g. the belief that the Sun revolves around the earth, merely because a very sage and moral person in the pre-Keplerian era may have believed that it did so. That was then.
I appeal to Stan (co-mod) not to allow this blog to be hijacked by Creationists
28 March 2009, 11:25 pmHenry:
Actually, I’m not a creationist, nor am I a fundamentalist. I made that clear at the outset. I’m simply not a Darwinian. I also have absolutely no intention of “hijacking” anything nor even of initiating a debate. I was simply commenting on a post, as I am now. I do believe in God–or let us say the unconditioned Real–however. Now, two things are possible: either the spiritual authorities I mention are what they claim they are or they are the most deluded of mankind, given the nature of their claims. They have written or spoken concerning mankind’s origins, and it is at variance with the Darwinian and materialist point of view. In other words, without or without “creationism,” the origin of things is either from “above,” and in the more real, metaphysically speaking, or it is simply “evolved” matter or “energy.” Take your pick. I choose the millenial and almost unanimous voice of humanity over the ages, not to mention what is intellectually axiomatic. In any case, neither the knowledge of electromagnetics nor that of astrophysics has bearing on life’s ultimate questions. Science–as distinct from scientism–is a method of experiment and hypothesis. Incidentally, the appearance of the stationary earth and the revolving sun corresponds to our ordinary experience, hence it is necessarily used by all scriptures in their symbolical accounts. You may be interested in these items by a prominent (non-fundamentalist-creationist) mathematician, the same one responsible for the mathematics of diffusion fields which solved the problem of space craft re-entry. He is also an expert in quantum mechanics (c.f. “The Quantum Enigma”:
The Wisdom of Ancient Cosmology
by WOLFGANG SMITH
http://www.amazon.com/Wisdom-Ancient-Cosmology-WOLFGANG-SMITH/dp/0962998478
Also, this article:
dolphin.org/geocentricity/Ellwanger3.pdf
29 March 2009, 10:16 pmHenry:
Sorry about the typo:
In other words, without or without “creationism,” should read “with or without.”
Thanks!
30 March 2009, 12:03 pmHenry:
Geithner’s ‘Dirty Little Secret’: The Entire Global Financial System is at Risk
When the Solution to the Financial Crisis becomes the Cause
By F. William Engdahl
Global Research, March 30, 2009
US Treasury Secretary Tim Geithner has unveiled his long-awaited plan to put the US banking system back in order. In doing so, he has refused to tell the ‘dirty little secret’ of the present financial crisis. By refusing to do so, he is trying to save de facto bankrupt US banks that threaten to bring the entire global system down in a new more devastating phase of wealth destruction.
http://www.globalresearch.ca/index.php?context=va&aid=12953
30 March 2009, 12:08 pmBuddhalovesPaine:
I found the book The Edge of Evolution By Dr. Michael J. Behe very interesting.
If the banks go bankrupt does the money that we have in disappear with the bank if the government does not bail the bank out? I know that there is FSIC or FCIS or some such thing that is supposed to insure our deposits but how exactly does the mechanism work?
STAN: For those who are covered, deposits are insured for up to $200,000 iirc. The Obama administration now wants to extend that coverage, which was for regular depositors to investment portfolios that contain more of the securitized financial instruments… the exact opposite of the direction they need to go, which would be to outlaw that form of speculation altogether…. along with compound interest, but they don’t get either, yet. And won’t.
30 March 2009, 3:16 pmHenry:
http://www.japanfocus.org/articles/print_article/3043
Overproduction not Financial Collapse is the Heart of the Crisis: the US, East Asia, and the World
Robert P. Brenner speaks with Jeong Seong-jin
“…The basic source of today’s crisis is the declining vitality of the advanced economies since 1973, and, especially, since 2000…What mainly accounts for it is a deep, and lasting, decline of the rate of return on capital investment since the end of the 1960s. The failure of the rate of profit to recover is all the more remarkable, in view of the huge drop-off in the growth of real wages over the period. The main cause, though not the only cause, of the decline in the rate of profit has been a persistent tendency to overcapacity in global manufacturing industries…
…The current crisis is more serious than the worst previous recession of the postwar period, between 1979 and 1982, and could conceivably come to rival the Great Depression, though there is no way of really knowing. Economic forecasters have underestimated how bad it is because they have over-estimated the strength of the real economy and failed to take into account the extent of its dependence upon a buildup of debt that relied on asset price bubbles…
…Can the U.S. continue its hegemony in the current crisis? This is a much harder question. But, I think that, in the first instance, the answer is yes. The world’s elites want more than anything to sustain the current globalizing order, and the U.S. is key to that. None of the world’s elites are trying to exploit the crisis, and the U.S.’s enormous economic problems, to challenge U.S. hegemony. China keeps saying, “we’re not going to continue to pay for the U.S. to continue its profligate ways,” referring to the manner China covered record-breaking U.S. current account deficits during the past decade and to the titanic U.S. budget deficits now being created. But, do you think China has now cut the U.S. off? Not at all. China is still pouring as much money as it can into the U.S. to try to keep the U.S. economy going, so that China can keep developing the way it did. But, of course, what is desired is not always possible. The depth of the Chinese crisis may be so great that it can no longer afford to finance U.S. deficits…
9 April 2009, 2:48 pmHenry:
Main URL for the above article:
http://www.japanfocus.org/-Robert_Brenner__S_J_Jeong/3043
9 April 2009, 2:51 pmHenry:
http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2009/04/09/obama-s-strategy-and-the-summits.aspx
Stratfor
Obama’s Strategy and the Summits
By George Friedman
April 6, 2009
…When Obama looks at the chessboard, the key emerging challenge remains Russia.
The key to sustaining the U.S.-German alliance is reducing Germany’s dependence on Russian natural gas and putting Russia on the defensive rather than the offensive. The key to that now is Turkey, since it is one of the only routes energy from new sources can cross to get to Europe from the Middle East, Central Asia or the Caucasus. If Turkey — which has deep influence in the Caucasus, Central Asia, Ukraine, the Middle East and the Balkans — is prepared to ally with the United States, Russia is on the defensive and a long-term solution to Germany’s energy problem can be found. On the other hand, if Turkey decides to take a defensive position and moves to cooperate with Russia instead, Russia retains the initiative and Germany is locked into Russian-controlled energy for a generation.
…Obama laid out the U.S. position as one that recognized the tough geopolitical position Turkey is in and the leader that Turkey is becoming, and also recognized the commonalities between Washington and Ankara. This was exactly what Turkey wanted to hear.
…the most important message to the Europeans will be that Europe is where you go for photo opportunities, but Turkey is where you go to do the business of geopolitics. It is unlikely that the Germans and French will get it. Their sense of what is happening in the world is utterly Eurocentric. But the Central Europeans, on the frontier with Russia and feeling quite put out by the German position on their banks, certainly do get it.
9 April 2009, 3:01 pmHenry:
http://globalresearch.ca/index.php?context=va&aid=13101
Eurasian Crossroads: The Caucasus In US-NATO War Plans
The South Caucasus is rapidly becoming a critical strategic crossroads in 21st century geopolitics, encompassing the most ambitious energy transit projects in history and the consolidation of a military corridor reaching from Western Europe to East Asia, one whose command centers are in Washington and Brussels.
The culmination of eighteen years of post-Cold War Western designs is on the near horizon as oil and gas are intended to be moved from the eastern shores of the Caspian Sea to Central Europe and beyond and US and NATO troops and equipment are scheduled to be deployed from Europe and the Persian Gulf to Afghanistan and Central Asia.
Nothing less is at stake than control of world energy resources and their transportation routes on one hand and the establishment of a global army under NATO auspices fanning out in South and Central Asia and ultimately Eurasia as a whole on the other.
9 April 2009, 3:03 pmHenry:
http://counterpunch.org/whitney04102009.html
Elizabeth Warren’s Devasting Report to Congress
“Liquidate the Banks; Fire the Executives!”
By MIKE WHITNEY
On Tuesday, a congressional panel headed by ex-Harvard law professor Elizabeth Warren released a report on Treasury Secretary Timothy Geithner’s handling of the Troubled Assets Relief Program (TARP)…Six months and $1 trillion later, and Congress still cannot figure out what Geithner is up to. It’s a wonder the Treasury Secretary hasn’t been fired already…the congressional committee understands that Geithner’s lunatic plan has no historic precedent and no prospect of succeeding…In the most restrained and diplomatic language, Warren is telling Geithner that she knows that he’s up to no good…The committee agrees with the vast majority of reputable economists who think the banks should be taken over (liquidated) and the bad assets put up for auction. This is the committee’s number one recommendation.
…Liquidation, conservatorship and government subsidization; these are the three ways to fix the banking system. There is no fourth way. Geithner’s plan is not a plan at all; it’s mumbo-jumbo dignified with an acronym; PPIP. The Treasury Secretary is being as opaque as possible to stall for time while he diverts trillions in public revenue to his scamster friends at the big banks through capital injections and nutty-sounding money laundering programs like the PPIP…
So, why is Geithner being kept on at Treasury when his plan has already been thoroughly discredited and his only goal is to bailout the banks through underhanded means?
That question was best answered by the former chief economist of the IMF, Simon Johnson, in an article which appeared in The Atlantic Monthly:
“The crash has laid bare many unpleasant truths about the United States. One of the most alarming… is that the finance industry has effectively captured our government.
10 April 2009, 1:06 pmHenry:
The Atlantic Monthly article referenced in Whitney’s article above can be found here:
The Quiet Coup
10 April 2009, 1:08 pmhttp://www.theatlantic.com/doc/200905/imf-advice
Henry:
http://business.theage.com.au/business/g20s-global-cash-splash-infuriates-european-central-bank-20090408-a0v2.html
G20′s global cash splash infuriates European Central Bank
Ambrose Evans-Pritchard, London
April 10, 2009 – 12:00AM
THE European Central Bank has launched a blistering attack on G20 plans to use the International Monetary Fund to pump liquidity into the world economy, calling it “pure cash creation” outside the normal mechanisms of control.
“This is helicopter money for the globe,” said Jurgen Stark, the ECB’s chief economist and Germany’s member on the bank’s executive board. “There hasn’t been a study to see whether the world needs additional liquidity. In the old days one would take a long time to explore such a thing,” he told the German business newspaper Handelsblatt.
The newspaper cited an “unidentified” central banker protesting that the G20 had rammed through radical changes that could do “irreparable damage” to the global financial system. He added: “What is happening with the IMF is scandalous. They are going to lay waste to everything in this crisis as a result of political horse-trading.”
10 April 2009, 1:40 pmHenry:
http://henryckliu.com/page185.html
G20 Summit Missed the Real Target
By
Henry C.K. Liu
Leaders of Group of 20 attending the second Summit on Financial Markets and the World Economy in London on April 2, 2009, echoing the first in Washington DC in November 2008, continued the tradition of superficial posturing for political theater on global television, while missing the real target which is the need not so much as to revive dysfunctional trade that has collapsed from its own internal contradictions, but to redefine the predatory terms of international trade created by dollar hegemony.
10 April 2009, 11:02 pmHenry:
The Economic Crisis: No, this will not be a Normal Cyclical Recovery
By Prof. John Kozy
Global Research, April 12, 2009
Philip Tetlock, a professor at the University of California, Berkeley, spent two decades tracking 82,000 predictions made by 284 experts. His findings, reported in his book, “Expert Political Judgment,” are that, on average, the expert’s predictions were only bit better than random guessing would have been. He writes, “It made virtually no difference whether participants had doctorates, whether they were economists, political scientists, journalists or historians, whether they had policy experience or access to classified information, or whether they had logged many or few years of experience.”
The only consistent attribute was fame, and the relationship was inverse. The more famous experts made worse predictions than the unknown forecasters did. Dean Baker [http://www.prospect.org/csnc/blogs/beat_the_press] has often pointed out that the media, when reporting on a forecast made by a prominent economist, should (but never does) quality the prediction with a list of previous predictions made by the expert that were wrong. But economists, even when their predictions are right, have a way of basing their predictions on sheer nonsense…
Economists and politicians are blaming this crisis on faulty practices carried out by the financial industry. And no one has pointed how retirement investment plans such as 401Ks regularly pumped money into the stock market and contributed to the bubble. These practices may have precipitated the crisis, but given the assault on the wages of working class Americans and the shifting of higher-paying jobs to foreign countries, an economic collapse, sooner or later, was inevitable. Anyone who can perform simple arithmetical calculations should have known it.
When a nation consigns its people to working for meager wages, its prosperity is doomed. The Congress, at the behest of corporate lobbyists, wrote into legislation the rules that permitted companies to offshore jobs, reduce real wages, and permit risky financial practices. Therein lies the root cause of this crisis. People merely do what the law allows. Without a prosperous people, America cannot be a prosperous nation. So welcome America to the third-world.
13 April 2009, 12:21 pmHenry:
http://counterpunch.com/whitney04142009.html
April 14, 2009
The Great Beast Lashes Out
Why is Goldman Sachs So Scared of Mike Morgan?
By MIKE WHITNEY
Mike Morgan is a registered investment adviser and a scrappy shoot-from-the-hip guy who doesn’t mince his words. Recently Morgan has come under fire from investment giant Goldman Sachs for his hard-hitting web site “Facts about Goldman Sachs”…
MW: Why is Treasury a revolving door for investment bankers that are tied to Wall Street?
Morgan: Because the American public allows it. Benjamin Franklin said . . . Well done is better than well said. Too many Americans gripe and moan, but when it comes time to doing anything . . . they sit back on the couch with a bag of chips and the TV. We think it is cute to use the TV to amuse our toddlers. Do you think it is any different for 75 per cent of the American public?
MW: Are special interest groups dictating policy in the Obama White House?
Morgan: I can’t count that high. But if you just look at Wall Street and where the money came from, you will realize that Barack Hussein Obama is nothing more than a puppet of Wall Street.
14 April 2009, 2:42 pm