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Tuesday, September 23, 2008 |
AlterNet: "The Bush administration's proposal to buy, with taxpayers' money, $700 billion of toxic liabilities from the corporate financial titans of Wall Street is a fraud."
Are sub-prime mortgages really the cause of the economic crisis? Don't think so. They take up only 9% in the total.
Mortgage Metrics Report (pdf).
Credit risk is a significant risk in bank derivatives trading activities. But what is their percentage in the total number of contracts? 9.1%
Comptroller of the Currency Administrator of National Banks Quarterly Report (pdf)
Of course, the above does play a part in the crisis. However, there is much more to blame.
Banking has become a fictitious trade. We know that money is just a piece of fiction, but you can buy goods with them. There are deeper levels of fiction in finance. You don't have to own money, shares or stocks to be able to trade in them. Banks lend them out, banks trade in stocks they don't have. It all happens with computers. It very much resembles a computer game. Money is shifted from bank to bank. When one of these has gambled too much and lost, it goes bust.
The whole banking system is making use of transfers of non-existent (in their vaults) money and stocks, which are based on the assumption they will be able to pay for them when they have got their profits on the trade. When they can't meet their obligations to other banks, when they can't buy back for a lower price the stocks they sold earlier and return them to their 'lenders', these banks are at risk of collapse too. And that is where the fiction becomes reality again, in redundancy, in banks closing down, in rescue operations with taxpayers' money that hack into your income. You only need a few failing banks to make the whole system topple. As long as this system of gambling with fictitious assets is going on, it will continue to produce crises. Pumping money into it will only postpone the total crash. Small measures will not be effective.
TPMCafe: "Principles to Guide the Bailout:
1) Financial institutions should be forced to endure the bulk of the losses with taxpayer funds only used where absolutely necessary to sustain the orderly operation of the financial system.
2) The bailout must be designed to minimize the opportunity for gaming.
3) The bailout should be designed to minimize moral hazard.
4) In the case of delinquent mortgages that come into the government's possession, there should be an effort to work out an arrangement that allows the homeowner to remain in her house as owner. If this proves impossible, then former homeowners should be allowed to remain in their homes as renters paying the market rent. This should be done even if it leads to losses to the government.
5) There should be serious efforts to severely restrict executive compensation at any companies that directly benefit from the bailout."
And this will certainly not help stem the crisis:
EUObserver: "Hedge funds and private equity should be watched closely, but no new regulation in the field is needed, EU internal market commissioner Charlie McCreevy told MEPs who called for legislation to make the way such funds work more transparent.
Meanwhile, the European Commission, as well as the Group of Seven industrialised nations - G7, welcomed the most recent measures taken by the US to counter the credit crisis, including a $700-billion rescue plan aiming to buy back bad debt from US banks and financial institutions."
Links: "So, in the free-market, Republican-run US, the state is becoming the owner-operator of a collapsing finance system, with the losses funded by the taxpayer, when the capital of pension funds goes down.
Paulsen, Bernanke and their counterparts in Europe, Japan and Australia too will increasingly face this sort of choice: do they let the next stricken financial monster die or put it on government life support? And how do they decide, when no one knows where the rest of the toxic financial waste is buried, where interbank lending has nearly dried up and where, according to economic historian Harold James, 'it is impossible to know what solvency means'?
Conventional economics blurs this distinction, but for socialists Karl Marx and Frederick Engels it was central to understanding the boom-bust cycle of capitalism. They called these claims on future profit fictitious capital. For example, share certificates are simply 'marketable claims to a share in future surplus value production' and the share market is 'a market for fictitious capital'.
Setting up a market for any type of fictitious capital is the equivalent of setting up a casino - a place where people can speculate in these claims on future profit. During boom times, as the expectation of profit growth drives financial markets higher, the total nominal value of fictitious capital in circulation always grows more rapidly than the actual mass of profits. The less this gambling is regulated, the more manic it becomes."
AlterNet: "The immediate cause of our financial meltdown is unchecked, unbridled greed. Mainstream newspapers and the business press are doing a fairly good job of explaining how the lack of regulatory oversight led us into this nightmare.
The Bush Bailout: Privatizing Gains and Socializing Risk."
And parties like the Democrats, New Labour and whichever ones are in power, are all co-responsible for the crisis, so you won't hear them about this.
TimesOnline: "Staff at Lehman's New York office who helped to cause the world[base ']s biggest corporate bankruptcy are to share in a $2.5 billion bonanza.
The bonus, which has been described by London staff as a 'scandal' has been pledged by Barclays Capital, the British-based bank that last week acquired Lehman's American operation and took on 10,000 staff."
AmericanProspect: "For nearly three decades, conservative Republicans have insisted that the cupboard is bare when it comes to needed social outlay. Conservative Democrats have been hesitant to spend more than token amounts because of concern for the deficit. Now suddenly, spending that will increase the deficit by $700 billion is greased to slide through Congress in less than a week but only because the money is for Wall Street."
Telegraph: "London's and New York's financial centres have changed permanently. Whatever happens, they will shrink significantly. The main unanswered question is whether the new City and Wall Street will continue its manic-depression, be run on proper free market principles or end up in a tightly regulated socialist 'dream'.
This economic crisis still has a long way to unfold. Even if the massive bailouts of the financial system work, the impact on the 'real' economy is only just beginning to be felt. Ordinary people will pay for this crisis in four main ways: some will lose their jobs; some will lose their homes; taxes will rise; and inflation will stay high."
As huge profits were gained by this fictitious trading, the financial world will try to stick to it and pass the risk to the taxpayers.
In the Netherlands the gambling goes on.
Those responsible for the ruin have received huge amounts of money doing this. It's disaster capitalism, where the traders profit from and promote a falling market.
12:02:35 PM 
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PakistanDaily: "Was there a top secret and mysterious operation of the US Marines going on inside the Marriott when it was attacked on Saturday evening? No one will confirm it but circumstantial evidence is in abundance.
Witnessed by many, including a PPP MNA and his friends, a US embassy truckload of steel boxes was unloaded and shifted inside the Marriott Hotel on the same night when Admiral Mike Mullen met Prime Minister Yousuf Raza Gilani and others in Islamabad.
Both the main gates (the entrance and the exit) of the hotel were closed while no one except the US Marines were either allowed to go near the truck or get the steel boxes unloaded or shift them inside the hotel. These steel boxes were not passed through the scanners installed at the entrance of the hotel lobby and were reportedly shifted to the fourth and fifth floors of the Marriott."
People'sDaily: "Pakistan's interior ministry said on Sunday that the authorities had information three days ago that terrorists would carry out a attack in the capital Islamabad."
A terrorist attack right in front of the US marines? No way.
11:03:19 AM
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FT: "A UN watchdog has found nothing so far to substantiate U.S. intelligence suggesting Syria had almost built a covert nuclear reactor before Israel bombed the site last year, the agency's chief said on Monday."
Israel's Sacred Terrorism: "The basic doctrine is that Israel has been a hapless victim - of terrorism, of military attack, of implacable and irrational hatred. It is not uncommon for well-informed American political analysts to write that Israel has been attacked four times by its neighbors, including even 1956. Israel is sometimes chided for its response to terrorist attack, a reaction that is deemed wrong though understandable. The belief that Israel may have had a substantial role in initiating and perpetuating violence and conflict is expressed only far from the mainstream, as a general rule.
In the final analysis the West, and in particular the U.S., let itself be frightened, or blackmailed, into supporting Israel's megalomanic ambitions, because an objective relationship of complicity already existed and because once pushed into the open this complicity proved capable of serving the cause of Western power politics in the region. Just as Zionism, based on the de-Palestinization and the Judaisation of Palestine, was intrinsically racist and immoral, thus the West, in reality, had no use for a Jewish state in the Middle East which did not behave according to the laws of the jungle, and whose terrorism could not be relied on as a major instrument for the oppression of the peoples of the region."
10:58:17 AM
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© Copyright 2008.
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