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

Hi, all,
I've been taken by Martin's analysis of the situation in the US. I
guess that it's fair to say that debts have been for a long time a
commodity. What made the difference this time, which is something that
Martin points to but that I'd like to stress, was the utterly lack of
control on the government's part on financial practices that are, in
and of themselves, highly risky. The damage has been, of course,
global, as the losses in retirement funds all over the world suggest.
Seen that way, what is at stakes in a matter of ideological
commitments about how the economy works and what the role of
governments should be.

Jorge Larreamendy

Jorge Larreamendy-Joerns
Profesor Asociado y Director
Departamento de Psicología
Universidad de los Andes
jlarream@uniandes.edu.co

On Sep 20, 2008, at 3:12 PM, Mike Cole wrote:

> 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
>> _______________________________________________
>> xmca mailing list
>> xmca@weber.ucsd.edu
>> http://dss.ucsd.edu/mailman/listinfo/xmca
>>
> _______________________________________________
> xmca mailing list
> xmca@weber.ucsd.edu
> http://dss.ucsd.edu/mailman/listinfo/xmca

_______________________________________________
xmca mailing list
xmca@weber.ucsd.edu
http://dss.ucsd.edu/mailman/listinfo/xmca
Received on Sat Sep 20 18:44 PDT 2008