The sky is falling! The sea is rising! The ice cap is melting! So the Fed
chair pushes his Great Depression analysis; the Treasury head extends his hand
to worried creditors. According to the recent Forbes 400 list those wealthy
creditors have a net worth of $1.6 trillion. If these distressed loans will
appreciate in value for a payback to taxpayers they would also appreciate for
the Forbes 400. If collapse is in the cards why isn’t Buffet rallying his
class to save the system? Since the Fannie and Freddie takeover gives the
power to Paulsen to renegotiate mortgage loans why has he not begun to do so?
If Bernanke is such a student of the ’30s why doesn’t he understand pushing on
a string? Which was the robber baron who said that a depression is when money
returns to its rightful owner?
The basic problem is that the masses of the people, that is to say, the
workers and those who would be workers if the financial industry hadn’t
exported all those jobs, can’t afford to buy houses, rent apartments, buy
digital tvs or cars or even pay off their existing loans. And giving money to
wealthy investors won’t change that reality. And listening to journalists and
the usual suspects they interview doesn’t aid understanding either. Everyone
recognizes and acknowledges the housing bubble but when it pops they scramble
and scream how we need to pump in money to reinflate the bubble, even though
doing so would only put off the reckoning for a few days. Oil companies want
new oil leases not to drill for oil but to prop up their stock prices since
reserves drive equity prices. Paulsen wants money to buy up debts to keep the
housing bubble intact. But stock prices remain, even after yesteday’s 777 drop
in the Dow and 109 in the S&P, greatly overvalued and probably need to fall
another 20% to achieve an historically realistic PE ratio. The housing-income
ratio remains excessive so house prices should fall another 15-20%.
It does seem true that without intervention credit dries up, the economy
stalls and unemployment shoots up. But even if intervention occurs with a
taxpayer buyout there still won’t be a market of money-flush consumers ready
to buy houses or cars or dishwashers. And that is why there is much recent
writing, from the New York Review of Books to the Economist, about a major
push for infrastructure spending. The capitalists want it not because they
like bridges but because they realize consumers are tapped out so they hope
for profits from the taxpayers where infrastructure costs are spread out over
the entire population. Of course, the trillions of dollars that would cost
added to the ten trillion of current government debt, let alone all the
recently incurred Treasury debt or even the $700 billion current proposal,
would make serfs of us. And that is the point; the capitalists realize that
their historical paradigm — hire workers to make things and pay them to buy
those commodities — is dead. It died more than 35 years ago and has been only
a zombie since then, energized and moving through debt. And now the payment is
due: Final Notice!
Up through 1980 it was generally believed that the US debt was a bill to
someday pay off but with Reagan and ballooning debt through military spending
+ rich people tax cuts many perceptive observers realized that we were
entering a new era: the income stream. Capitalists don’t really want to be
capitalists in competition with each other. They want to be monopolists where
they can dictate terms and prices. But even then they don’t like monolpoly
where they have to dirty their hands actually running factories and
warehouses; now they aspire to be rentiers. They simply want to own everything
and collect monthly allotments from 80-90% of the population and the
government. And this is what motivates all the propaganda and legislation over
“intellectual property” and that is Bill Gates’ new capitalism. Gates went from
competing, more or less, to win the operating system war to monopoly in the PC
market and now into the “software as a service” realm where consumers will pay
monthly bills to use MS Office. And Monsanto wants a rentier income from every
green bean or ear of corn all people in all places all the time have to
pay. The real engineering that contemporary corporations seek is legal and
financial: they own; we pay or die.
Last week Michael Bloomberg, New York mayor and on the Forbes
list with $20 billion, was interviewed and explained that the current
situation grew out of financial innovation which was a response to crisis (not his
word). Bloomberg said that computerization and telecommunications had led to
automated and instantaneous stock trading and that made the stock broker
redundant and obsolete. An astute and revolutionary comment by Hizzoner. When
automation and speed hit an auto factory the workers lose their jobs. But Wall
Street adapted by inventing new investment vehicles and strategies so they
could not only keep their jobs but make even more money. Today is the fruit of
that innovation. Now we have SIV and CDS. CDS (credit default swaps) are
simply ways of gambling and their “value” (which assumes they have any value
at all) can be created out of thin air and their current stated worldwide
value is $61 trillion while 2007 worldwide GDP was only $57
trillion. Obviously the inmates are running the asylum.
If there is a solution it would be for nationalization of housing
itself. Take over the mortgages and renegotiate them down so that people can
afford not only to make the payments but also afford the food to cook in those
kitchens. Let the investors take the hit. And if they squawk then we can enact
wealth laws to fund these expenditures and even job creation overall. Most
people buy houses to live in, not to flip for a profit. Let specualtors suffer
and let’s move more people into all those empty tract homes. If our government
can go into trillions of dollars of debt to pay investors and make war it
could also spend the money improving the real lives of real people. It is
becoming clear that for perhaps the first time in history socialism is
not just a moral imperative but an objective necessity. The capitalists can no
longer create jobs for the masses or increase people’s real incomes. History
moves slowly but it moves inexorably. One hundred and fifty years ago one
didn’t need to be a genius to know that slavery needed to end (economic
problems of slave replacement was recognized among slaveholders in the 1770s)
but it took a devastating civil war to settle the issue. We may not survive
another international war with nuclear weapons. Greed, envy and lust dominate
our culture and these ’sins’ are fostered by Wall Street investors. It’s long
overdue that these sinners be reined in and corralled.
