Re: [xmca] US discovers capitalism doesn't work

Interesting analysis, Martin.
Part of what fascinates me is watching the Republicans argue against raising
taxes while coming up with a scheme to solve the problem that will make
ordinary citizens pay for their profits..... but they will be out of town
before anyone can deal with the situation effectively.

A story on Yahoo today says for the first time, what is most worrisome about
how this will effect the outcome of the upcoming election: The rascism of a
large part of the electorate may well be sufficient to ensure a Republican
victory even as them whats been the leaders in this long term disaster blame
"Washington insiders." - A Stanford U poll study.

mike

On Sat, Sep 20, 2008 at 9:21 AM, Martin Packer <packer@duq.edu> wrote:

> It seems to me that we ought to mark here the events of the past week in
> the
> US, as they throw light on the kind of social reality in which many of us
> live. I'm certainly no economist, but this is what I think I've figured out
> so far.
>
> A bunch of smart bankers figured out how to turn debt, especially mortgage
> debt, into a commodity. They arranged to package it and label it as high
> quality, with some dubious auditing. They arranged to market it to
> individual and corporate investors. And then they set about mass producing
> this new commodity, by exploiting the people whose debt they could
> purchase.
> They advertized easy credit to naïve would-be home owners. This pushed up
> house prices, but this was fine because it created more demand for
> mortgages
> and these loans were for higher amounts, so the size of the debts was
> doubly
> increased. They sold credit with one hand while with the other hand they
> sold the debt this created. A win-win situation, seemingly.
>
> Several things went wrong at the same time. The price of housing got so
> high
> that the demand to buy it dried up. The mortgage contracts turned out to be
> so grossly exploitative that the people bound by them were simply squeezed
> dry. So the value of the new commodities fell into doubt, and the banks
> found they could no longer sell them. They were over-stocked with goods
> that
> were no longer wanted, and overnight a vast amount of value simply
> disappeared. The banks woke up to discover that they could no longer pay
> their own debts, to one another, to industry, or to investors. The country
> woke up to find their savings disappearing, their currency falling, their
> homes not worth what they paid for them, their credit revoked, and their
> jobs on the line.
>
> So now the federal government has stepped in, and will buy these unwanted
> commodities from the banks for a total of perhaps $500 billion. The banks
> will get real cash in its place and will be able to do business again. The
> government will hope to squeeze some value from the mortgage holders,
> presumably on less onerous terms, in order to get something back for its
> purchase. The wheels of capitalism will turn again, and the crisis may be
> over.
>
> This at least is the picture that is now visible, on the basis of data
> collected by government agencies and reporting by the media. But the
> participants in all this were able to see only a small part of what they
> were doing, and understood what they saw only poorly. Part of this was
> wishful thinking and deception, but it was also a result of the positioning
> of the various actors and the ways capitalist economies take on a life of
> their own, escaping both the needs and the intentions of we who inhabit
> them.
>
> It's a fascinating situation, enough for a dozen good dissertations.
> Alexandra Michel and Stanton Wortham, who were at ISCAR, are publishing a
> book based on their study of the contrasting cultures of two investment
> banks. I hope they will extend their work to include what is going on
> today.
> To me it would be especially interesting to explore the psychological
> dimension – how desires are created and manipulated, how perceptions of
> risk
> and probability are changed, how people act in a time of such instability.
> But it also shows how modern society, civilized and modern and advanced, is
> a house of cards.
>
> Martin
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Received on Sat Sep 20 15:22 PDT 2008