meanwhile, back in reality (bank crisis round 2)
 

look pretty much anywhere this morning and you will see the collapse of lehman brothers, the collapse and absorption of merrill lynch, the

FT.com / In depth - Wall Street in turmoil

Wall Street's bloody Sunday

Richard Adams: The mortgage monster created by US bankers is getting its revenge | Comment is free | guardian.co.uk

there is a simple bottom line, and there is the more complex one.

the simple bottom line is that this should be the end of the neoliberal world: o sure, you can export the worst features of industrial capitalism and shift roduction facilities place to place in search of the lowest wages and most politically pulverized workforce, and so long as cheap consumer goods keep showing up in the stores, there's no problem. "markets remain rational" to the extent that capitalist ideology has never been very good at taking account of what it actually correlates to in the world and besides working people are just extensions of machines in any event.

but here we have yet another wave of crisis at the level of capital itself, one which follows directly from the assumption that markets are rational, that regulation is an impediment, that left to themselves market actors make reasonable decisions because there's something magical that happens when capital is at stake, all fog goes away and even the most idiotic person suddenly becomes a rational actor--unless they do not hold capital, in which case they are of no consequence. the deregulation of banks has resulted in crisis upon crisis, beginning with the s&l problem of the bush administration and culminating so far in the disasters of the past couple weeks. the generation of financial arcana that circulates in transnational markets which have a shadow existence and no regulation whatsoever---institutions turn profits, shareholders and happy, executives derive obscene salaries and when the shit hits the fan...

no-one is responsible, the state steps in, market fundamentalism goes out the window, these actors are "too big to allow to fail" and here we are in the brave old work of capitalist oligarchy and it's lovely friend crisis, which is one of the features capitalism is most adept at producing.

it'll be interesting to see how this gets spun, how continuity is asserted in the face of it.

in "the harder they fall" there is a conversation between the main cop and the head of the fictional equivalent of studio one about the hunt for the "bad guy" who is played, i think, by jimmy cliff. the cops want to put an apb on the radio during top of the pops. the head of studio one says---you interrupt top of the pops for that and you better catch him. you disrupt the continuity of entertainment and you create a Problem.

what do you make of this?
surprised this monday morning?
what do you think the political consequences of this will be?
if none, how is that possible?

The sky is not falling. Repeat, the sky is not falling. No need to panic or declare the end of capitalism every time the market undergoes a correction. It is my hope people will learn to exercise fiscal discipline and to live within their means. My main complaint is the government stepping in to bail out companies. Fannie and Freddie should have been left to fall on their own and not get a bailout. Corporate welfare is just as disgusting as social welfare. The market will sort itself out. The private sector has already taken measures to mitigate the impact of the bankruptcy.

And you've lived in America HOW long? :rolleyes:

The MARKET will sort itself out. Mom and Pop Homeowner, however, will be well and truly fucked without some sort of protection. I'm not interested in helping failing banks--they buttered their own bread on this one. I'm REAL interested in protecting homeowners from the failure of those banks.

o i don't think the sky is falling. i think this is a massive demonstration of the inadequacy at both the descriptive and normative levels of neoliberalism--markets do not "do" anything--agents within markets, understood as sets of constraints, do things. there is no invisible hand, there is no god at the far end of the invisible hand--there is no rationality that assures adequate or beneficial functioning. this is a self-evident feature of capitalist operations in historical terms---and the only source of information that makes any sense is the history of actually existing capitalism.

capitalism produces crisis as one of its primary features. patterns of regulation emerge to restabilize the system, redirect it, reorient it---these regulation are state-driven in the absence of meaningful political pressure that comes from elsewhere. crisis is then one of the systems principle products as system. it has been like this for much of the history of modern nation-states, much of the history of capitalism--which has never performed as neoliberal market-fundamentalism would have you think---an ideological system that presupposes a wholesale ignorance of history which issues into a wholly metaphysical view of the present.

i would think that ideology should be done now by *any* rational standard.
because this nonsense is a perfect example of what neo-liberalism really does best--generates vast income for the top tier of financial institution, treats responsibility as an externality--and in the end, leaves the public, by way of the state, holding the bag.

btw i think your equation of "social welfare" and "corporate welfare" kind of obscene. we could have it out about this, but in another thread....suffice it to say: "wtf?"

aside---it's kinda funny to see a libertarian viewpoint adopt the same relation to the reality it purports to describe as a trotskyite adopts vis-a-vis the coming proletarian revolution--o dont think so much about this version of the world--we havent *really* done what we're talking about yet. so the viewpoint--the insanity of libertarian ideology--abstracts itself from problems by positioning itself in a dreamworld.

I have to wonder if those who let the "market correct itself" are ready for what it would do to America's economy? I am with ratbastid on this...

My broker is EF Hutton, and EF Hutton says he went out of business in 1980 due to check kiting. He will gladly pay you wednesday for a hamburger today.

This is the result of unbridled real estate speculation. I only wish they had replaced the term "exotic loans" with "dumb-ass fucking the country loans".

Speculation is the root of all stupidity. Well, except for the erroneous report last Monday that UAL was declaring bankrupcty. That was an evil kind of stupid that caused a $1 (b) billion loss. Can't wait to see the lawsuits from that. If they end up with a structered settlement, maybe UAL will take that agreement to JG Wentworth and get cash immediately for 40 cents on the dollar.

RB, it's nothing of the sort. Part of capitalism, or neoliberalism as you call it, is that those who make bad decisions will fail. That's why I generally disapprove of bailouts, because they reduce moral hazard. Let me repeat that in a different way: failure of firms demonstrates the integrity of the system. You have it precisely backwards. Schumpeter would be wagging his finger at you disapprovingly.

schumpeter--another metaphysician---"creative destruction" is simultaneously an example of the teleological fallacy and an evacuation of anything like a space for responsibility---the zeitgeist enters this way, a reassuring continuity of narrative, such that the story of capitalism is unbreakable and no-one ever does anything that is not functional, not even this:


Wall Street crisis: Is this the death knell for derivatives? | Business | guardian.co.uk

the original links to warren buffet's 2002 letter....

in the end, no-one is responsible for anything, the dynamic everything. so schumpeter ends up being as crude a dialectician as stalin.


even greenspan, who oppose the freddie and fanny bailouts on the same lines as you, loquitor, is now saying that this is too big for schumpterian rationalizations.

I'm happy today. :) Maybe this will be the wakeup call we need to start regulating stuff and putting in safety nets to prevent this kind of stuff from happening.

When they get too greedy and want growth at any cost to make the numbers (and the fundamentals aren't there) this kind of stuff will occur.

Greenspan participated in creating the clusterfuck that caused overheated home prices and led to the current meltdown. Obviously he's feeling twinges of regret.

Pretty much everything that we think is wrong will end up being reflected in pricing, which is what is supposed to happen. And lots of people are going to be analyzing the correctness of their computer models.

I have a client who lost a hump of money trading derivatives a few years ago. His issue was that the small probability ended up coming true - which of course tends to happen if enough time passes; you just don't know on which trade the small probability will happen. We can argue about whether it was the model or the judgment or both, of course.

My question for you, RB, is this: if govt created the current regulatory environment and that led to the current imbroglio, what makes you so confident that the next regulatory scheme isn't going to carry the seeds of its own destruction too? See, I'm old enough to remember the S&L fiasco and the role the govt had in creating it, as well as the horrendous job it did cleaning it up. You might not like certain aspects of capitalism but you can't possibly establish that the govt will do better. In fact, Buchanan and (to some extent) Coase pretty much established that in most cases it can't.

Roachboy: What alternative system do you propose to replace capitalism? We've seen plenty of historical precedent that reinforces that despite its volatility, capitalism ultimately creates more wealth and prosperity than any other economic system.

I agree with you that economists look at things from a very heartless perspective; to give an oversimplified example, a policy which takes -9$ from the pockets of the poor/middle class and puts $10 in the pockets of the rich would be viewed as a +1$ net again and therefore economically efficient, with the theory that the winners can compensate losers never becoming more than just that--theory.

Despite these shortcomings, and maybe I'm just cynical, capitalism harnesses human greed for the greater good in a way which no other system can. People, in general, will NOT work as hard for the betterment of someone else or the society in which they live than they will for benefits that directly impact them personally. Sorry--I won't budge on this one--I believe it wholeheartedly to be true. I believe that although under capitalism many are left better off at the expense of many left worse off, we would ALL be worse off under any other system. It's hard to argue against big pharma when the drugs they sell wouldn't have been created and available to anyone at all had the incentives which motivated investment in to creating the drug in the first place been absent.

This is not the end of capitalism--if anything, Henry Paulson has proven that he is willing to let the Int'l Finance industry take its medicine, and with the Fed's safety net withdrawn, you're seeing the market work itself out ala BoA buying Merill Lynch yesterday. The true test of the system is how it operates under extreme pressure and duress, and so far I would say that considering the Dow is only down 290 pts (2.55%) as I write this, it's passing the stress-test so far.

It's not that all capitalism is bad, that's not it at all. But there needs to be checks and balances to make sure people aren't cheating to make a quick buck.

Some real estate speculating is ok, but it should be limited to buying old homes and fixing them up. Not buying new construction and selling it for tens of thousands over the base price before it is even finished using a 80/20 interest only loan with 0 down (and never having the intention of moving in).

QFT.

A bank failure will not affect those who are making their mortgage payments. The clerk at Walgreen's who decided they could afford a $600,000 house, and who is clamoring for undeserved "protection," is another story. Much like those in Galveston who refused to leave, are now clamoring for help, and who can't wait to sue FEMA.

/threadjack


Correct. The original post seems to be a call for socialism, due to the failure of capitalism. Capitalism's failure, like the rumors of Mark Twain's death, is greatly exaggerated.

I almost hate to say it, but this has been on it's way for a while. It's really sad, and I can't see an honestly good option for us right this second. All that we can do is try to prevent this in the future by ending this idea that the government interfering with the market is the debil. Fannie and Freddie were having accounting problems years back. I told my grandmother to move her investments out of them and into more stable accounts (I think she's doing her investment through something religious now, like Thrivent).
It was a bigger drop than I expected, but overall not really.
There will be rampant partisanship and ideologue-ing, which won't get us anywhere. If it's as bad as I think it will be, we won't even learn from our mistakes and it will happen again.

There's already a line forming outside Washington D.C. of industries wanting a bailout.

Someone asked a funny question either this morning or yesterday, "Why is it that the US supposedly has no money for universal health care but is more than happy to come up with a few billion to save a bank or two?"

Yeah I know, tell me about it. This is one area we could use a nationwide basic finance education mandate.


I agree, but I'm not ready to count mom and pop out just yet. They are a lot stronger than you think. But point taken, I would lean towards mom and pop protections too.
-----Added 15/9/2008 at 04 : 46 : 43-----
Yes, I would agree the current system still needs some work.

Why? I am against both. At least in it's current form.

The problem of optimizing the total wealth/benefit is a difficult non-linear problem. Individuals working only in their own self interests will likely not achieve global optimization and are likely to get stuck in a local optimization. In order to get past these local optimizations one needs an independent entity to help control the market and that is where the government comes in.

Anyone who believes that individuals acting completely alone in their own self interests serves the most good to society is naive.

Yep, agreed. This pretty much sums up my feeling.

I don't agree with limiting real estate here. The speculation will go up and eventually come down. We need to be more disciplined on our purchases. That's why I haven't bought a home in a 'hot market' yet. Because I resisted the temptation to take a out a bad loan. I will patiently wait it out and most likely buy a foreclosed property or two for a great price. Most of my friends and acquaintances are similarly disciplined.
-----Added 15/9/2008 at 04 : 53 : 47-----
Same here. I wasn't really surprised. I have been expecting this correction to happen for a while now. There will be some more coming up too. It's like a healthy purge. Glad to hear your grandma made some good financial choices, good on you for looking out for her.

Unfortunately, you may be right. This disgusts me.

Good question. Someone should put it to the powers that be.

It's pretty obvious who is lining up, and I honestly think that workers in those industries should do everything in their power to get other jobs lined up asap. I'm looking at you, Detroit.

This is where I tend to come down on the issue. It isn't about getting rid of capitalism per se. It is about regulating the wilder elements. Have a look at the sorts of policies and regulations that came about following the stock market crash of the 20s. These are the sorts of things that are required to keep balance.

The sorts of libertarian fantasies that are called for can result in greater profits for a small number of people. I favour a system that has the ability to benefit a greater number of people.

The whole country, including the government, has been living on credit. It seems nobody owns anything in the ownership society. How many people actually own their house? Their car? Hell in order to get a more expensive car then they can actually afford many people lease. So after making payments for 3-4 years they don't own jack shit. They hand it and the keys back over and lease again, if their credit checks out. Every thing's bought on credit. "NEED!" a new computer, plasma TV, latest surround sound? No cash? Fucking finance it! Much of this financing is/was tied to the value of their house on a ARM mortgage. Once the ARM rate went up and the value of the property went down the house of cards began to fall, IMHO.

I don't know the cause of the latest greatest crisis, but I think this credit situation hasn't helped any. I don't think the sky is falling, but the market sure as hell is and where it stops no one knows. Seems to me selling out now only locks in your losses. I'm sure as hell glad I'm not holding any Merrill Lynch or Lehman's and my insurance isn't through AIG.

Speaking of AIG- What's going to happens to all those folks down on the gulf who are insured with AIG if it fails?

ok so first off, what i think this will help collapse is the ideology of neo-liberalism, the dominant economic ideology in the united states of the post-reagan period, the premises of which you all know because they're repeated often enough as if they were informational elements and not ideological statements--markets, rational, state=distortion blah blah blah.

neoliberalism is an ideology within capitalism and is no more capitalism itself than those evangelical protestants who claim to *be* christianity are the entirety of christianity.

i have never believed the neo-liberalism was about anything beyond reducing political risk for the state by withdrawing it from economic sectors in response to heightened uncertainty--my assumption has been that crisis, which is more then norm in the actual history of capitalism than is the contrary, would be addressed by a rolling-back-in of the state as regulatory agent.

i figured this could happen in an incoherent manner--if handled by republicans--or a less incoherent manner, if handled by anyone else. except libertarians, who really should be nowhere near power ever.

and this is what you're seeing.

even in the benighted political context that is the united states, which seemed to be summed up for me by cnn's website today, which headlined a story about a trainwreck in los angeles and relegated a Real Problem for the entire financial order to sentences off the the side--even here i think the veneer is off neoliberalism. maybe it'll even get named---everywhere else on the planet, the dominant ideology in the united states has a name--here, it is a natural phenomenon, like the weather.

none of the banalities about capitalism as channelling avarice and short-sightedness and self-interest in a constructive direction should make any sense any longer--yet the repetition continues, like there's some little machine in your skull that just does the same things over and over until it runs down independently of anything happening in the world. this crisis is a direct *result* of the ways in which capitalism since reagan has channelled avarice and short-sightedness, and demonstrates the reality of the directions it has taken.

what i hope in the short run is that not only does this strip the veneer off neo-liberalism, but that it also forecloses any hope mc-cain/palin may have had to being elected. i don't expect any great change from obama, but he HAS to be a more rational alternative, given the mess that reality is at the moment, than more of the same idiocy from the bush period.

i think there will be significant pressure to increase the types and enforcement of regulation on banking and on the grey market in derivatives etc,. in particular. the republicans are ideologically opposed to regulation and so cannot rationally be expected to implement it in anything like a coherent manner.

so i don't see this as the end of anything in particular apart from a particularly incoherent view of capitalism and the cowboy capitalism it has spawned.

i also think that alot of regular folk are fucked as well...

RB, you still don't get that these phenomena are to be expected? and that part of what caused the problem in this case is government interference? Short-term bumps are tough but that's all they are. What do you envision as the alternative? A five-year plan? The whole point of private enterprise is that there is risk of failure. Failure is a feature of the system, not a bug: it provides object lessons and stimulates success by others.

This is nothing new, and it's only the meddling of politicians that's going to ruin stuff. Too bad there is always someone who thinks s/he knows better who wants to remake the econony as s/he thinks best. It doesn't work. Never has, never will.

Roach, I wouldn't quite make the leap that you seem to want to make from all of this - that the startling and significant implosion in the financials somehow indicates the need for a paradigm shift away from capitalism itself.

I will say that this compellingly demonstrates a couple of things: one, the foolhardiness of the ideology of complete financial deregulation. What we have had for the past decade is a system of financial institutions that were highly leveraged enough, and interconnected enough, to become vital in the sense that they were 'too big to fail'. Implicit in all of this was a government guarantee, that in a crisis, taxpayer money would be used to prevent a failure - kind of like how the FDIC guarantees deposits. And yet this banking system was not made to accept the flipside of that guarantee - some kind of regulation to control risk. As roachboy alluded, it was assumed that the private sector could manage risk well enough on its own, that capital was equivalent to rationality. This has been proven disastrously, demonstrably untrue.

A word on 'too big to fail'. I understand the impulse, echoed by some here and no doubt motivated by some sense of capitalistic justice, to simply cheer as Lehman burns and the other financials retrench. Unfortunately, the world we live in doesn't work this way. The amounts of money at stake are so enormous that the impact on Lehman's counterparties (other financial institutions with exposure to Lehman's debt), to take just one example, would reach most of the way to a trillion dollars. There is a serious risk of a cascade of bank failures to follow, as other banks' assets disappear from their balance sheets each time another bank goes belly-up, defaulting on its debts. Even without a cascade, what we would see - will see, in the coming days - is a severe contraction of credit that is going to choke the economy for some time to come. You can't invest in new economic growth without credit. So as much as we like to see the economy as in most cases self-correcting, there is a limit to what any economy can absorb without complete collapse, and I think some here are underestimating the impact of what a total collapse of the credit system would do to the US economy - and the world economy, for that matter. (Bailouts aren't a great solution - those who mention moral hazard are absolutely right. The idea is not to get here in the first place. But the phenomenal levels of risk taken by private enterprise have brought us to this juncture and left us to choose from among pretty terrible options.)

So yes, some regulatory safeguards need to be put in place, and no, it's not really all that hard to imagine what some of those might be. We cannot, as a system, be so cavalier about manipulating assets whose worth is almost impossible to value. And we cannot then trade those assets at absurd levels of leverage - I think I read that the average gearing was something like 14 to 1 - don't remember if that was the industry, or Lehman particularly.

Anyway, the second thing demonstrated by the crisis is that our economy, boosted by both a housing stock and a financial sector that were vastly overvalued, has been far weaker than we imagined. I'm afraid the financials are just the canary in the coal mine, and that we are going to see a lot of spillover into the 'real' economy, and soon. Expect things to get worse before they get better.

What "government interference"? Where? When?

We gotten a lot of abstract moralising, and that's about it.
-----Added 15/9/2008 at 07 : 14 : 05-----
There is nothing to be done.
There is nothing that can be done.
Nothing should be done.

You've completely missed his point by making this into a moral issue.

Neoliberalism is a peculiar variant of capitalism, which at the moment, is unraveling. "Free trade" has failed. The "3rd world" is not cooperating and the neoliberal world order is too weak to force it down their throats. It's become difficult to say the solution to today's problems is more deregulation and privatisation. What's left to deregulate or privatise? Don't like Putin? Talk to Jeffrey Sachs or his many enablers.

Neoliberalism is on the way out. Some new mode of regulation will replace it, and in fact, that mode of capitalist regulation is developing at this very moment. Thankfully, the passivity and negativity of neoliberal ideology (gummint = doubleplus ungood) tends to keep believers from participating effectively in debates about regulation.

Soldier on!

basically, guyy said what i was thinking of saying in response to the strange idea that neoliberalism=capitalism.
it's a function of a blinkered political and historical view of things, that equation.

The fear of most neoliberals is that the only alternative to the "free market" is communism. But there is a third way... just ask John Maynard Keynes.

Neo-Liberalism
http://graphics8.nytimes.com/images/...Norris_190.jpg

The third way
http://amykane.typepad.com/photos/un.../5374_0030.jpg

All (or most) "neoliberals" are alike, and you speak for them?

i don't see what, if any, point you're making with that, necrosis. a shared ideology is just that. a predictable response based on a shared ideology is just that. you don't need to go any further than that: logic and pattern (look at the thread so far if you doubt me). personality is irrelevant.

but i may be swayed by your disturbing avatar.

A political career? "I ran a Wall Street firm into the ground. Vote for me." I could see him screwing things up in a McCain administration in the increasingly unlikely event there is one.

Speaking of McCain, i think the worsening financial crisis is going to suck the air out of his campaign. There will be something other than lipstick and pigs and moose to talk about, and it won't be fun news. Real news in the 24/7 news cycle crowds out the Rovian nonsense, and McCain brings nothing else to the table.

I'm more curious about what effects it might have on Obama and his neo-liberal economic crew.

I wasn't able to watch this happen in real time like I wanted today. But I have been expecting this failure for the past week. I didn't expect AIG into the fold.

I'm not interested in the government bailing anyone out, including those homeowners that speculated that they could afford a home buying on a no income verification loan so that they would qualify for more money. They gambled and lost. As far as mortagees to the failing banks, I'm not worried about them their debt will be assumed by some other bank that buys out the liquidated loan. Heck, I just bought a 5 bedroom home 2,264sq ft, for $.57 on the dollar @ $84/sq. foot you can't build anything for less than $300 these days.

I'm glad that major players in industries are faltering and failing. The Big 3 automotives looking for bailouts???? C'mon that's retarded, they should have been also competing in the other market segments like small cars, minivans, and crossovers. Instead they did the "American" thing and went for the low hanging fruit and easiest options.

I'm very much ready to accept the pain of what's going on. I've been telling lots of family and friends to be read for such a shake up and be prepared for a rainy day. See there are people and companies out there who will drive the economy back up. It may be slow, but it will happen.

Sorry, let me correct myself:

as an aside, have you noticed the consistent use of "perfect storm" and other such weather-related rhetoric in the american press accounts of this? you'd almost think that ike was tailor-made for opinion-management purposes---and notice the difference in interpretations being floated by the presidential candidates: for mc-cain this is a matter of subjective deviance--excess greed---which means obviously that neoliberalism itself is not at play insofar as his constituency is concerned---while obama talks about systems of regulation---which is not a recognition of underlying problems, but nonetheless is a far more lucid take on things than what mc-cain is offering. even at the level of terminology.

we'll see what the day brings.
but isn't ideology funniest when it's transparent?

What are are ya Canadian? Tisk, tisk, tisk- always trying to twist around what you said into what you said. Damn you Canadians!

WaMu is next on the danger list.

Think they've been on the "list" for a while. The one I didn't see coming was AIG. But then my new sources are limited.

I believe that there are others, many others that are hovering and not being allowed to announce themselve because it will trigger a bigger run. I believe the Feds are trying to manage this so that it comes in small waves rather than large ones.

at the same time, it is clear that the collapse of the bush administration's political credibility across the board is making everything even more difficult than it otherwise would be. read any account--it is clear that "no-one is believing anything they're told..."

we should start seeing more indications of the near future once the american show opens in an hour or so. so far in europe and asia, there's a continuation of the momentum of yesterdays; ny exchange close and actions on the part of cental banks to limit the damage....

And as everybody knows that it is clear that the collapse of the legislative branch's political credibility across the board is making everything even more difficult than it otherwise would be. Read any account--it is clear that "no-one is believing anything they're told..."

Our only hope is Charlie Rangel, chairman of the House tax-rules committee, to steer us through these murky financial waters.

Everybody knows.

otto, darling, your new game is growing tedious.
you should play a different one before i start vaporizing your posts.
i'll not put this in yellow, but i can change that.

Why? Because you disagree? I think Otto's posts are fine. Certainly a LOT LESS offensive or taunting than the many others around here (just look at all the ridiculous pan bashing and ridiculing in his thread). Why the threat to censor? Who's modding the mods?

I believe it's the re-edit including the NYPost photo, in other words, the post went from discussion to trollish humor, in one simple edit.

With all due respect to the reasonable criticisms of neoliberalism, this issue shouldn't have come as a surprise, but it always does.

Herd mentality and short-term memories tend to mislead people into thinking that things could always and should always improve. This sort of market movement could have very well been predicted, and some have done so. The S&P has operated at a net loss since 2000 and the Dow Jones has returned to a level it hit in 1999 and again in 2000, 2001, and 2006—and both had a good climb between 2006 and the end of 2007. Those who have this whole time expected (or at least prepared for) such things as this week's events call these past ten years a secular bear cycle.

Individual investors should get to know what this means so they can protect themselves (eg, sometimes holding a lot of cash is better than having everything in the market).

The government, Wall Street, and others more directly involved should stop being so greedy or power-hungry and understand these issues as well. A relatively unregulated economy is ludicrous when you know how the machine works. Do you know of any other elaborate machinery that has no mechanics, no operators, no "reconfigurators"?

Neoliberalism is a travesty of economic theory and practices.

actually, RB, I'd say liberalism (in the classical sense) produced capitalism. It's not the only possible outcome of a liberal order but it is the one that historically has resulted from real life application of liberal principles. The two aren't synonymous - I agree with you there - but they do tend to go hand in hand. I don't know what "neo" adds to the equation.

As for Keynes....... been there, done that, got the bumper sticker. Remember "stagflation"? That was brought to you by John Maynard. Not intentionally, of course. But that's pretty much the logical outcome of excessively empowering planners. There are always other agendas to be served, and that leads to unintended consequences.

Go ahead, call me neoliberal. I can take it. Heck, call me neoconservative, too. It makes just as much sense.

it's funny, loquitor, reading the press accounts of this farce and noticing the rhetoric, which is about storms and about schumpeter and about anything and everything that preserves a sense of continuity---which is in a sense about avoiding material and ideological problems by pushing them into some imaginary continuum that extends into a future just the same as the past.

neoliberalism is in serious serious trouble---but because it is the dominant ideology, and because the press speaks largely through that ideology in part because it is responsible for its dissemination and in part because in the states---and ***nowhere*** else, neoliberalism is a lingua franca on matters pertaining to the economy. that is what being a dominant ideology entails. the problem that ideological crisis generates is that it undercuts the frame of reference that shapes how this information is organized. in the soft authoritarian political context that is the american, this is an obstacle to being able to articulate the collapse of the ideology. it's a circle, and not an interesting one. intellectual monocultures run into it alot. neoliberalism is to this soft-authoritarian context what dialectical materialism was to stalinism. hard to articulate problems for the frame itself when the frame is understood as necessary.

that'll pass, i expect.
but implosion of neoliberalism probably wont pass, though.
you'll just have to figure out a different set of fables to believe in, sooner or later.


neo- generally implies redux but with alterations. i didn't make the term up.

this is an interesting interactvie graphic

A Year of Heavy Losses - Interactive Graphic - NYTimes.com

So naturally, if indeed "neo-liberalism", "capitalism" are on its way out, what do you (general you) think will take its place as the next economic system? Do you think it will be a collapse or a gradual change?

For those so opposed to "neo-liberalism", "capitalism" can you elaborate a little bit on why you do so? Is it the theory, practice? Do you like some elements or is it a wholesale dislike? What improvements or alternatives do you think are better or workable?

For me its simple...an unregulated free market leads to the greatest abuses (of workers, the environment, product safety, etc) and the greatest disparities between the "haves and have nots".

A solution....a constitutional amendment...along the lines of "a well regulated" militia....how about a "well regulated" economy?

j/k with the amendment...but de-regulation is not the answer....and it never has been.

jorgelito--neoliberalism is not the same as capitalism in general.
protestant evangelicals who refer to themselves as christians are not the same as christianity in general.
this should be simple.
i don't understand why there's such a problem with this.

we'll see what happens with aig tomorrow....

Actually, DC, I think it's a very productive start. However, I would think there needs to be some elaboration on "well-regulated". Do we mean well regulated as in a well done job of regulation, or lots and lots and lots of regulation? That I think is the tar baby here.

I will say as a person who leans towards neoliberalism, capitalism, I don't really have a problem with SOME regulation. I do see TOO MUCH regulation as being strangling and detrimental to business and the overall economy in general.
-----Added 16/9/2008 at 08 : 57 : 36-----
That's a good analogy Roach, very clear and understandable, thank you.

The problem is because the terms are used loosely and in a variety of ways causing confusion, in a similar manner as your Christian analogy.

So, what do you think of the rest of the post?
-----Added 16/9/2008 at 09 : 08 : 40-----
ADD: Well it looks like the Feds are going to "bail out" AIG with a $85 billion loan.

I just want to be clear that my own position is not one that calls for an end to capitalism per se. Rather, I want to see an end to the drive towards completely deregulated and laissez-fair capitalism. This particular flavour of capitalism does not sit well with my humanist sensibilities.

For further clarity, I am not looking for an answer in the great bug-a-boo of communism either. To my mind they are at either ends of the economic spectrum from each other and in their orthodoxy are essentially bankrupt.

What I seek... what I always seek... is a balance between the two poles.

History has shown us that both extremes are problematic (to say the least).

There are a few things that I would say need regulated. I'll start with international trade.. It's not that it's a bad thing to grow and strengthen foreign markets, and it has stabilized the world. It isn't all bad. But it moved too fast, and it was too lop-sided. Companies wanted , and got, outsourcing of jobs and factories done in 10 years. The foreign countries grew really fast and production of raw supplies didn't. But now we have people who are just living with what they have and not buying anything new, there are plenty of people who can't get work (although it isn't too bad yet), and older people are working longer. The 20-somethings and 30-somethings don't have the money/credit to buy houses because they can't get into jobs that pay enough with the rising prices.

Speculation and short selling are two other things that need to be reigned in. There should be limits on how much any one person can do each year. And there needs to be some type of serious penalty if you foreclose on a house or can't pay back credit card loans. I'm not sure what that penalty should be, but something like 10 years of garnished wages would be good place to start.

The problem is how do you avoid bubbles? The tech bubble was justified at first, but then you had investors throwing money into it as fast as they could because they couldn't lose. The more investors, the higher the stock price. Until enough of them want to cash out, and then all of them panic and sell. Repeat with the housing bubble and the oil bubble. And it will continue into the next hot thing because the money has to go someplace, and whatever seems like a good idea to a bunch of people will catch the attention of more and then the big banks will want in and make a quick buck... And it all repeats.

And the government's deficit spending needs to be regulated as well. But that is another topic.

overnight, it became clear that aig was too big to allow to fail.

Federal Reserve rescues insurer AIG with $85bn bailout | Business | guardian.co.uk

aig collapse would have put into serious jeopardy the entire neo-liberal/"globalizing capitalist" financial order, the network of flows that has long outstripped the purview of nation-states. over the past 3 days, somewhere in the area of a trillion dollars has been pumped into this system by the fed and central banks from around the world---the main system of flows, what neoliberalism is really about, autonomous capital flows operating in a spatially segregated virtual region moving independently of any coherent relation to the wider social world, motoring a new concentration of wealth and a radical reconfiguration of the geography of political and socio-economic power---while the social consequences are abandoned to the play of abstract forces---one of the consequences of neo-liberalism---here used to designate an entire ideological configuration--is an extreme extension of one of the main logics you saw fully in place under fordism--the dominant order legitimates itself through service delivery, through the fact of operative flows rather than through the location and effects of them. when the location and effects of these flows generates radicalized social inequality, the problem is talked away as being a function of the "natural" consequences of climates in the second nature of markets---but when flows themselves are seriously endangered, THEN you have a political Problem.

so you see what neoliberal structures look like, what the situation of the nation-state is really in the new order, how irrelevant populist conservative discourse is to the main project neo-liberalism is geared around---so you see the consequences of the collapse of politics onto the fact of activity, onto the fact of flows---so you can piece together the relation between neoliberal social policies in any given space--which is "let em choke, the don't matter"--because functionally, we don't matter---risk reduction, and the focus of neo-liberal attention.

you see a host of reasons why neo-liberalism is cooked, why is must and should be cooked, why some other logic has to be put into place.

What I want to know is, "what are the taxpayers going to get for this $85 billion?"

debt.

The money can come from China, ultimately.

hear that sound?


FT.com / In depth - US Treasury recapitalises Fed

that's the sound of this form of capitalism cracking at it's seams.

here's a .pdf which shows something of a.i.g.'s structure, which helps explain why it was too big to allow to fail:
http://media.ft.com/cms/425ac584-841...0077b07658.pdf
(you may need to subscribe to ft.com to see it)

so what this means, i think, is that the nation-state based mechanisms available to stabilize major perturbations in the trans-national capital-flow stratum of social being (neat-o terminology, yes?) has reached it's limit.
there's been something on the order of 3 TRILLION dollars pumped into the banking system over the past 72 hours. this capital has come from most of the central banks in the metropole.
it was not enough.
the particular ineptness of the bush administration--acting in strict accord with the premises of the neo-liberal ideological substitute for the world---has resulted in a.i.g. costing so much to bail out that the fed is stretched to its absolute limit--and that, folks, means that we were on the brink of the collapse of the state itself as a regulatory mechanism *capable* in principle of managing dysfunctions at the level of these capital flows.

this is still unfolding---what do you make of this new creak in the system soundtrack?

why do you think this is still not THE story in the american media?
i think it is because, in part, the press has adopted neoliberal premises as its collective lingua franca, and that as the world commensurate with this ideology hits a wall of it's own making, description requires that one step outside the discursive frame of neoliberalism itself--you cannot deal with questions about axioms from within a proof that presupposes them--so it follows that you cannot deal with ideological crisis if your own framework presupposes the ideology that;s in crisis.

hear that sound?

so we just created more money out of thin air?

best i can figure, cyn, the money was created from thin air by way of t-bills.
it's a little hard to say because, for example, there's not a whole lots of real estate on the dept of treasury's website devoted to actual life, particularly not when compared to the amount devoted to neo-liberal horseshit about competition, deregulation and their virtues.
but here's a link to press releases, which of course tell you very little:

U.S. Treasury - Press Releases - September 2008

Pretty much. But we'll likely borrow the cash.

Watch the dollar drop now.

well at some point in time either the shell game stops or the ponzi gets called, seems like they are still trying to pass it around.

no choice on this one, cyn, it seems.
the scale of this is WAY beyond that...
i'm trawling about for more detailed/updated information...feel free to join me and post what you find. other on the fly analyses welcome too, of course.

this is fucked up. that is the short version.

Um. What do you think money is?

Our money has been worth the value of the paper and the ink since the gold standard went away. And before that, it was worth the promise of gold, not the actual gold.

Money is a convenient fiction.

yes, i understand the idea of the fiat currency, but when the House in Vegas wants to give out more chips there has to be funds to cover them in some fashion.

Here there isn't anything but the wave of a pen, nod of a conversation, or maybe even just a press of a keyboard.

At some point, it would seem, people (and countries) will stop buying these "bills."

And then what does the US do?


Treasury selling debt to help Fed | Reuters

what matters is continuity of movement, the continuance of flows, not what flows. the objects that move through these systems are secondary to the fact of their movement. trafficking in debt means that value is a temporal form, not a 1:1 relation--so it's not about objects, not about thinking with or through objects...it's thinking motion, systems that allow it, and relations which are structured in and through that movement. value is a convention--but it's always been convention, nothing more. the value of gold was a convention and the assumption about that convention was that scarcity (or at least limitation) of supply functioned to anchor that convention in something outside itself--but that too was a convention. and what mattered was the movement of these conventional objects--these time-forms, like sounds---through particular systems. when you extract "value" from the systems of circulation, you convert media, but the conversion of media doesn't mean that you move from a system anchored in circulation to something else--you just move from one circulatory system to another.

the entire idea of the old marxian labor theory of value was to anchor value to praxis, acting on nature, transforming nature into usable objects, as a way of making it more "material"----but even there value was located in labor power, in process, and it's object-expression---commodities---was seen as "dead labor"....

i don't know why this is surprising, that the anchors of bourgeois "reality" are basically objectifications of modes of being that are basically motion or pattern within motion (another metaphor that you could plug into the above and run the machinery).

what matters is not the relation to materiality, not the relation between process (which is temporal) to the object-oriented world that we see and live through because we see it---what matters is the equity of modes of allocation, what matters is the distribution of power. in contemporary capitalism, we--you and i---have NO power. we are spectators. this is a form of spectatorship. and it also turns out that the institutions we assumed DID have power do not have it--not really--what has power is the flowing of capital within abstract networks. that rules the world, the world that neoliberalism has enabled.

better to watch tv, i sometimes think.

RB, on that theory, the gold standard is preferable to fiat currency because gold provides an "anchor" to something real. Except that that anchor made it very difficult to react to market shocks, which is why it was abandoned. (In effect we traded some degree of unavoidable inflation for a smoothing of the business cycle - not a bad trade, in my view).

The system isn't cracking. It'll take a few months but things will consolidate and return to normal. Unless we start rescuing every bad business in sight like the Japanese government did - that kept japan in recession for 15 years.

when the nixon administration scrapped bretton woods and instituted floating currency, the idea was to abandon an outmoded break on capital accumulation. it never anchored anything to anything, the gold standard--rather it was a residuum of the inability of folk do deal with value as an effect of circulation, as relational, as based, in the end, on momentum, and so, by extension, no-thing.

the neoliberal order is definitely in trouble. i think the system that has taken shape is at its limit. i don't think that means capitalism will collapse---what it means is that we're entering a period of mutation in the course of which you'll get a little demonstration of what it mean when folk characterize capitalism as an autopoeitic system. changes in environment force adaptation in system logic in order to preserve system identity. neoliberalism is as outmoded as the edsel at this point, but without the lovelt design points that make the edsel still interesting--it's inability to provide either a compelling or robust description of actually existing capitalism is now obvious--that an inadequate description leads to incoherent policy is now also obvious. but this has been true for quite a long time--the only real changes are (a) the material required for becoming-visible within the bizarre little ideological bubble that is the united states are in place because (b) the dysfunctions of the system have reached the metropole. that's it.

that folk invested in precisely the ideology that is being pulverized in real time have trouble seeing what's in front of them is not surprising.
that it is so pervasive in the states is an index of the monocrop culture we live in from the political viewpoint.
it provides an idea of the consequences of soft-authoritarian rule, shows its limits.

so i find it almost funny watching the problems folk are having with getting their heads around what's in front of them.

Hang on to your seats, WaMu is next.

Looking at T-bills, apparently 25% are held by foreign governments, which is double what it was in 1988. Is this going to put more of the U.S. public debt in foreign hands?

It seems to me that as time goes on, the U.S. continues to cede an increasing amount of control over its economy to foreign powers via the unabated increasing of public debt.

When will this stop?

interesting, comrade. i was just looking at a blog that talks about this very question. i'll link it here because the original has some useful hotlinked areas. and because, well, it's a blog.

Winter (Economic & Market) Watch Financial Tar Pit Update

Interesting indeed, roachboy.

I find it disquieting that people aren't more focused on the bigger dangers of this issue. Most people look at the bailout figures and get angry at big business. How soon they forget that such money is absorbed by the banks and the bill for it is being held by someone else, much of it quite possibly in Asia. The more foreign bills being swept up, the more control they have over American economic policy. The threat of dumping (i.e. cashing in) T-bills is enough to get someone's attention, especially when you figure that there's $1 trillion dollars' worth between Japan and China alone.

But here we're talking about foreign banking absorbing U.S. banking. Interesting. I wonder how this will play out globally as things continue to shake up.

Probably. Then Goldman Sachs and Morgan Stanley. Then?

baraka--well, if things move in a straight line, it looks like the end of the american empire, engineered through idiocy and incompetence by the very people most committed to the idea of american empire.

Then back to your regular scheduled programming....

It's one aspect of the kind of environment that adds to my suspicion that a Puritan reformation is on its way in America. It's not as extreme as it sounds, so it's not far-fetched; what it means is that some crisis (or crises) will empower someone who will guide American interests inward in a mode of self-preservation. It might not go as far as isolationism, but it will certainly be a great shift in what we've come to know as American culture and society.

America is going for broke; someone will have to fix it.

Much of the wealth in this country seems to be obtained not by hard work and innovation but by political influence and corruption. I don't know what regulations could be put in place to avoid this with the foxes watching the hen house but what we have now is not giving capitalism a chance to work. Of course I guess it is sometimes hard work and innovative to set yourself up to get in on the corrupt action.

well, as an aside---what matters really i suppose is whether things do or do not move in a straight line. by a straight line, i mean a bunch of things, but principal among them is the possibility of another republican administration coming into power and being responsible for dealing with the fallout of this fiasco. that would, i think, mean the end of the american empire. and that will not be pretty. i do not think obama that radical an alternative, but i do think that the international community, such as it is, probably prefers something of a variant of the status quo in terms of geopolitical and economic power simply because they know it and it generally works to their benefit--so obama might well represent a kind of "coming to their senses" on the part of the us internationally and i think that'd generate more room to manoever for the states. either way, the unipolar world of republican fever dreams is self-evidently on fire, with the ruins of neoliberalism helping it burn. because everywhere except in the us, neo-liberalism and the new and improved colonial order they call "globalizing capitalism" and american domination are synonymous more or less--even amongst more friendly political positions, the three operate in tandem. it seems to me that the americans---whom i refer to at a distance because i do not really recognize myself anywhere in a context wherein a nitwit politics like that of the us right can be taken seriously---anyway, the americans have a choice--burn with the outmoded arrangement or put the place in a position to remain a meaningful player in the mutation/reconfiguration---be the geopolitical entity the marginalization of which is amongst the central features of the mutation, or be part of reshaping it, so that the mutation would be something else.
-----Added 17/9/2008 at 03 : 12 : 16-----
an end-of-the-day wrap kinda article from the financial times.
i continue to be struck by the distance which separates the coverage in this paper from anything that has appeared in the states, and i keep thinking about why this is the case and what is going on with it.

anyway, read on.....

FT.com / In depth - Credit panic hits historic levels

so what it looks like is that that machinery of the international trading system is jamming up, and the reason for the jamming is a kind of institutional panic that is deploying across the instruments of credit.

at this point, there's no obvious conclusion, but things are ramping in a kinda scary direction.
unless you're like me, and are mostly just watching this and trying to figure it out.

Good question. I wonder if there is a threshold (theoretical or practical) in which the percentage of foreign holdings of our t-bills becomes a national security issue. There has to be some line where our economy becomes very vulnerable and beholden to a foreign interest.
-----Added 17/9/2008 at 04 : 35 : 23-----
I think alot of this stuff is over the average persons head. It is complex and alot to absorb and understand. Since the media knows this they probably avoid it or just reduce to panic headlines. Heck I must admit, the few articles I've seen I have given just a perfunctory glance in favor of some other story or article until lately when it was more of a presence in general news.

So yes, people are mad, but they really don't know who or what to be mad at.
-----Added 17/9/2008 at 04 : 36 : 33-----
Good lord, I don't know. Do you think Morgan Stanley and Goldman Sachs could be next?

I do think CitiCorp/Group could be next.

Hopefully it won't be an endless fall of dominoes.

which headline comes from an american newspaper?

Dow Falls by More Than 440 Points in Jittery Trading

Panic grips credit markets

And then what? What do you think will replace it? DO you think there will be a complete paradigm shift or gradual change? Will it be a systems change?

Sadly, yes I do-

The Associated Press: Shares of Morgan Stanley and Goldman Sachs plunge

it's hard to say yet, jorgelito, don't you think?
seriously if you look at stuff being written from folk not in the united of states, land of monopolitics, the equivalent of yellow corn no. 2, what i am saying about this period is not that out of place---this is the endgame of the run that neoliberalism has had since the early 1980s.
like i said, i think this will take some time to shake out, but i think that the situation the americans find themselves in and the power they have to shape their own destiny--this at the system level--will be seriously impacted by the next election, either way. that much i think i know. my assumption is that this mess is politically connected to the us, to neoliberalism--derivatives are in a sense the perfect expression of neo-liberalism in general, selling what fucks you socially as if it made perfect economic sense---so we, i guess, are not only the sucking sound at the center of the global economy, but the whole mess is to some extent associated with us, even if there were lots and lots of players in lots and lots of places---this whole mode that landed us here is cowboy capitalism, think short term, make the big money because tomorrow the Rapture's-a-comin so who gives a shit, only the Minions of Satan will be left--and even if that's not true, i'll have mine.

what takes shape is taking shape, it hasn't taken shape. i think that the elections--and by extension the kind of role the americans can play---will impact on it too.

i don't think we know much yet because the magnitude of the problem isn't yet known. you can't work out problems structural until you know what the effects are, really--and even though i am sure the neoliberal order is burning, that's a general statement--there's nothing in particular that links it to the current debt implosion beyond--well--deregulation, market fundamentalism, the arbitrary nature of ethics in neoliberal land and....ok so never mind.

i think we're watching something kinda huge and interesting happen.

but its best not to rely on the american press to tell you about it.

=============LATER====================
-----Added 17/9/2008 at 08 : 47 : 50-----
http://www.nytimes.com/2008/09/18/bu...=1&oref=slogin

i don't feel the need to say much about this.

I realize it is a broad and impossible question, but I figured you had some thoughts about, thank you for responding. I'm hoping we can explore it more.

I agree it is something big, something big will happen, and that the elections will be very prominent. I have no idea really as to what will happen next, but I have a suspicion that we (global) are all inextricably linked. So what ever we or whomever do, all will be affected. But from here to the next phase, can go either way: either a jump to a different system or a modification/reformation of the current one in phases. Regardless of what happens, I would imagine it to be on a large scale.

I actually may have to retract my previous contention: It is conceivable and quite possible that the sky indeed, is falling.

One way or another we must weather the storm.

That is not what happened at all, loq.

Yamaichi Shoken, the Hokkaido Development Bank, the Japan Long Term Investment Bank, & Japan Securities & Trust went under. The JLTIB collapse set off the bankruptcy of Life, Sogo department stores, and Daiichi Hotel. These were all big firms. Needless to say, there were countless others that didn't make the papers. There were lots of buyouts as well, just as in the United States today. IBJ got swallowed up by Daiichi Kangyo, the Bank of Tokyo was bought out by Mitsubishi...

Here's the dilemma: if you let the firms go, you eventually find out just what people will pay for say, credit default swaps. It's not likely to be very much. Due to the magic of the market, everyone now has a ballpark figure for other credit default swaps. The assets of a number of other outfits will take a hit and the financial panic will spread. On top of that, people might ask "Hey, why was AIG even doing credit default swaps? Where were the SEC & CFTC?" What if Phil Gramm, McCain's economic "brain", had not been able to sneak that Commodity Futures Modernization Act through Congress in 2000?

My apologies for not getting my Japanese financial crisis post up. It disappeared into the aether three times before i gave up.

I think something big is going in as well. Banks are failing and the markets are in a nose dive. AIG wasn't just another company. Letting it fail simply wasn't an option. All this deregulation/free markets philosophy hasn't panned out so well. The bills just now coming do, IMHO. We went to war. Good idea? Bad idea? Doesn't really matter now- we're in it now. Did we pay for the war? No for the first time in history we went to war, increased spending and cut taxes. How'd we do that? We borrowed the money so it really didn't effect the average US citizen. Most peoples commitment to the war begins and ends with words and $3 magnet they slap on the back of their car. Now the US financial markets and banks are in serious trouble. The solution to that? Borrow more money to shore them up, other wise the entire house of cards is going to tumble. Which in turn, IMHO, creates an even larger house of cards.

I remember the President speaking just days (maybe the day) after 9-11. What was one of the first things he told people? Go travel, go shopping, go about your normal lives. I think he even gave a plug in there to Disneyland. The message was clear- keep consuming, keep spending. Not only were people told to keep spending- they were not asked to pay for any of the new expenses related to security or the war(s.) Some people asked what about the costs of these wars? Not to worry, it's not going to cost that much and the oil from Iraq alone will pay for most if it. Just go forth and spend, spend, spend. And people did just that. A lot of people did that by tapping easy to obtain, questionable loans backed by their house. Eventually the bubble burst in the housing market those questionable loans started a financial crisis, not just for individuals or families but finally for the companies that made the loans, or in many cases bought the loans.

Recently, within the last two days, I saw some talking head on the TV saying "It's not that bad. I go to the store and I see folks buying a new plasma TV, IPhones and all kinds of stuff. Much of this is all overblown hype." He could be right about spending, I don't go to the stores in the US and I've got no idea what the latest reports are on consumer spending. But I'd be willing to bet a lot of that spending is going on the good ol' Visa or Master Card. It's the American way. People are simply following not only their governments advice but it's example. As for his comment about it all being overblown hype? I think he's dead wrong. We can't spend our way out of this mess, that's just crazy. BTW- not long after his infotainment segment I saw an ad telling me I "could now borrow enough money to get out of debt." Makes as much sense as spending our out way out of debt.

I'm not a fan of taxes. I don't even live in the US but I pay not only property taxes there, but my income is generated from the US so I pay not only US taxes but I pay sells tax (which is the main tax here in Mexico) on almost all my purchases. So I'm paying taxes to Oregon, the US, the state of Yucatan and Mexico. I like to spend as little of my income as possible on taxes. But at some point we're going to have to find a way to pay for all this borrowing. As I see it it's a great big shit sandwich and the sooner we start eating the smaller everyones bites going to be.

So yes, as I see it, it's a storm. A big storm and we must find a way to weather that storm. I don't think it's going to be pleasant but the sooner we start working to find real solutions the sooner we'll get through it.

yes tully... I'm a fan of the old FRAM Oil filter commercials...

"You can pay me now, or you can pay me later." if you happen to remember those....

I'd rather pay the least, and that's generally upfront.
-----Added 18/9/2008 at 04 : 12 : 43-----
early news don't look so good.

Yes, this mornings not look any better. Central banks are pouring cash into the markets everywhere. Where's this cash coming from? The analogy of a Vegas Casino is interesting to me. I was looking around yesterday trying to find who owns the "chips" that are flooding back into the "pits." All too often, in regards to the US, that answer is from Asia and the Middle East.

Someone on another thread was talking about how Japan went through tough times and one argument was they caused more problems by allowing the government bail out major players in their economy. I have no idea what or how Japan fared. What I do know is the Japanese don't owe everyone else a shit load of money. Their government doesn't and their people don't. It's simply not part of their culture. I spent time their, about six months, every Japanese person I ever met had money in the bank. If they made $100- $10 went in the bank and they lived on that $90 somehow. So I'd imagine if the Japanese government did end up bailing a bunch of private companies out they did it with their own money. We're not doing anything like that. Between Japan and China we owe nearly one trillion dollars. That fact alone sends alarm bells ringing in my head.

180 billion dollars overnight.
the fed pumped 180 BILLION into the banking system overnight.

what does 180 billion anything look like?

the scale of this is amazing.

i'm making some popcorn, sitting back and enjoying the show.

i decided to do a little test and take myself out to dinner last night. people were talking about baseball and their regular lives and such. that asshat lou dobbs was on one of the flatscreen monitors, trying to act decisive. then he went away because it was time to watch baseball. i suspect its like that everywhere. is it?

you know in Gettysburg they had this lit up soldier thing to help show what about 50,000 people looks like. It was a lot of freaking little lit up soldiers I can tell you!

The number I'm getting this morning is more like 247 billion-

Bloomberg.com: Worldwide

How much can you pump into it before what you're pumping becomes severely devalued?

Enjoy your popcorn, it maybe worth $30-$50 a bowl in the near future.

The MegaPenny Project | Index Page

The MegaPenny Project | The Sears Tower -- 2.6 Trillion Pennies

http://img.photobucket.com/albums/v1...88-08-25AM.png

The MegaPenny Project | One Hundred Billion Pennies

http://img.photobucket.com/albums/v1...88-11-47AM.png

Holy crap, that's a huge band-aid!

This is typical American style...until everyone starts losing their jobs. Isn't it?

Again, that is not what happened.

Big players did go bankrupt. And unlike here, people went to jail. In the US they end up as bigwigs on the McCain campaign with $11 million severance packages. Of course, there is nothing we can do about that, nothing we should do about that, and we must not even have bad thoughts about doing anything about it.

The "gummint bailouts made things worse" arguments is a product of stereotypes about the Japanese economy, bad reporting, and a distorted Western self-image. Unfortunately, there isn't too much in English that's worth reading about the Japan's lost ten years. What's out there is mostly of the NYT "their problem is that they need to be more like us" vein or neoliberal analyses that say that the slump was caused by insufficient neoliberalism.

The eighties were the tail end of the postwar boom in Japan and, happy horseshit aside, a period of continued decline in the US. When Japan agreed to allow the yen to rise against the dollar in 1985, it created losses for Japanese holders of US bonds. These players put their money in the TSE and in commercial property. Banks had already been playing the property market because they were getting a better rate of return their than in primary production. Interest rates were low, so money was available for people to get into the markets. The gov. was trying to sell off the recently privatised national railway's property, and therefore wanted bidding wars. As stocks rose, corporations naturally started issuing more stock. Banks started playing the stock market more. Many borrowed against their land holdings to play the stock market. Stocks trebled in value from 1985 to 1989, and real estate doubled. It was said that the value of all land in Tokyo's 23 wards was worth more than all the land in the US.

When the bubble burst, property values couldn't cover stock market losses and vice versa. Banks, corporations, and gov. bonds were downgraded, and foreign borrowing became more expensive. In order to around this, banks had to raise their self-capitalisation rates, which was usually done by cutting off lending. Just where does over-regulation figure in? The Jusen (=S&L) debacle was caused by lack of oversight encouraged by free-marketeers.

It didn't help the situation that neoliberal globalisation was becoming the rage during the late eighties and nineties. The opening of agricultural markets drove a lot of farmers out of business and put even more property in play. Offshore production, (which the property bubble encouraged by making expansion in Japan more costly) helped made employment more precarious, and workers were more and more reluctant to spend. Cutbacks in government and corporate welfare schemes -- cheered on by neoliberals, of course, personal responsibility yadda yadda yadda -- made people even tighter with their money.

that's excellent, cyn....thanks. so overnight between 187-240 billion dollars. so translated into pennies and laid flat, 28 square miles.

pfft. gone. hoovered up.

here's a an overview of the story so far. because it came from the washington post, it seems inevitable that it would be riddled with weather imagery.
no-one and no institutions and no ideology---no system aspects---no responsibility, no choices: this is a hurricane. a "perfect storm"
it's like living in passive voice, being in the states and reading the modes of distancing and naturalization the press continues to engage in.

washingtonpost.com

by the time you reach the end of this article, you have entered the world of petit bourgeois bromides.
fact is that debt---especially consumer debt---has been one of the central mechanisms that capitalism has instituted that has effectively enabled it to buy political stability.
it was one of the central features of fordism.....except that it was tied to a very different geography of production than presently obtains, and a very different distribution of political power (think strong trade unions and collective bargaining)
it was, and still is, one of the central features of post-fordist or flex-accumulation or "globalizing capitalist" socio-economic organization in the states in that it has enabled a period--now about 30 years long, now ending----of dissociation:

1. it enabled a separation of "lifestyle" as it is structured at the social-imaginary level from any necessary relation to material underpinnings, except to the extent that one enters the debt system and submits to its discipline (e.g. pay what and when)...

2. debt enables the continued operation and expansion of consumption: this disconnect between consumption and the organization of production in any particular space results in a kind of pressure to run prices downward---one mechanism for running prices downward is the exportation of manufacturing, its fragmentation---one of the fundamental processes of "globalizing capitalism" that has unfolded WITHOUT significant opposition in the states because the consumer debt-enabled consumption bubble has become THE space of identity formation and circulation within this (of objects, of "lifestyles" and of the material settings--houses, say---in the context of which one can array one's commodities--and so make the space's one's "own"--for example) has come to provide a sense of continuity.

you would have thought that the radical reorganization of production--fragmentation, exportation, etc----would have registered as a PROBLEM--but instead it intrudes on the busywork of Land of Consumption enabled by debt as a punctual thing, an aside, an occaisional problem--witness for example the career of michael moore, who functions for the most part as the old working-class signifier by virtue of the baseball hats, associations with flint and general political line---a signifier amongst others in a consumption-space that has moved way past such quaint categories as simulacrum and become a 360 24/7 wrap-around imaginary world.

this seems of a piece with the rise of american style neoliberalism, its politics of distance and dissociation, of imaginary identity rooted in an illusion of nation at a period where nation-states were increasingly irrelevant.

one thing amongst many that this catastrophe-show indicates is the impotence of nation-states.

but the article, relegating this to the weather, in the end says: return to some petit bourgeois sense of balance and all will in the end be well.

but the type of activity that is the reverse of that--debt and the accumulation of objects and the accumulation of debt and the accumulation of objects---has been the centerpiece of the american system---and the exporting of its consequences the central feature of american empire---for 30 years.

the chickens are coming home to roost, and i think the article above is interesting until its last paragraphs.
in the end, the guy is thinking in terms of individuals about a situation that way outstrips individuals.
system thinking is still rare in the states.
it's probably an underlying reason for the collapse of the empire,.
but we'll see.

This startling piece points to the central role of excessive leverage - permitted by relatively recent deregulation - in producing the current crisis.

The Big Picture | How SEC Regulatory Exemptions Helped Lead to Collapse

I think I said 14-to-1 earlier, but it turns out that was terribly conservative. Five broker-dealers - three of which have now gone bust - were given special permission by the SEC to lever up to 30:1 and even 40:1! Hurray for deregulation.

For those unfamiliar with leverage: let's say you have a million dollars to allocate. If you are 'gearing' 40 to 1, you would put up that million dollars to borrow 40 million and invest it. This works out magnificently if you win - a 1% return on your 40 million is really a 40% return on your initial cash outlay of 1 million. But if you lose, the losses are also staggeringly large. The idea when doing this is to hedge your plays in a number of ways so that it is unlikely you'll suffer a net loss, but the higher up you gear, the harder it is to pull that off...

An article in American Prospect provides a good summary of what caused the problem and proposes several reforms:

The "free marketeers" wont like what they read.

What about the decoupling myth and its double-whammy?
 

Here's something else we should be focusing on: decoupling is a myth, and many people are being wiped out because of it.

The wonderful theory of decoupling states that when stocks rise, bonds fall, and when stocks fall, bonds rise. But this isn't necessarily the case. When you have huge (unregulated) banks dealing with both types of products and they start to fail and come up short, suddenly decoupling becomes a pipe dream—your "defensive portfolio" gets hit and it gets hit hard. No balancing, no deals to be found with dollar-cost averaging in mind. You just take it on the chin.

And now you have the rumours about mergers and acquisitions. Great, let's concentrate the problems and put the reins into fewer hands.

And this is a double-whammy. The other side of decoupling that is revealing itself as a myth is found when you see Asian and European markets taking severe hits based on what is largely an American problem. Other markets haven't decoupled from Western markets, it appears. Decoupling is a myth and it's because of the current two-tier problem of globalization and deregulation. And what's frightening is that I can only assume that many of these economies have already started to emulate the American mode. Maybe it's time to put a stop to that?

This isn't just a financial issue; it's a moral issue. Think of all the financial lives being ruined by what originated as a problem overseas—a problem allowed, nay, empowered by American economic policy.

I don't think that's necessarily true DC. I am a free marketeer but I think common sense would dictate some regulation to be reasonable. Absolutes and extremes at either end of the spectrum are not he ideal. A free market with some regulation seems to be best.

there are a few problems with that, comrade (keep in mind that all this is on the fly, so there are trailing-off points, things which are left dangling etc....)

a. the present--um--"problems" are not simply american--look at how this crisis is spread, look at which institutions are affected---it's involved much of western europe, russia, asian stock markets--the chinese stock market has lost about 70% of its value over the past few months, and the government this morning started buying up shares....traffic in these curious "devices" or "objects" has been transnational---they are an element within the new system of capital flows (new since the 1990s made real-time coupling of markets possible, so since the development of the communications system that allows us to play around here)...

b. capital flows exceed the power of any given nation-state to contain. to the extent that these flows are *The* center of globalizing capitalism, it's most elaborate construction project, decoupling is probably impossible. and given the aggression with which this neoliberal order has colonized much of the planet, it seems this is a problem for all kinds of people, in all kinds of places, and not just for the holders of capital and their speculative courtiers.

c. if nation-states are incapable of managing this order of crisis, then you'd expect the transnational institutions that have been the enforcers of "market discipline" to be operating here, wouldn't you? where's the imf?

what's becoming obvious through the absence of, say, the imf in this context is that "globalization" really is a new form of neo-colonialism, and just as folk are saying, there's one game for the wealthy and the institutions that are symmetrical with that class position and an entirely different one for the rest of us, so it is that there are two types of neoliberalism, one for the metropole and one for everywhere else. this is why i think it correct to think in terms of american empire, though it's a passive-aggressive sort of empire, one that spins out of the older neo-colonial order rather than out of more paleolithic forms of domination.

d. absent an institution on the order of the imf--that is a transnational institution (and the imf is not in fact this, but obviously an arm of american policy, an expression of american interests--which is only a surprise if you live in the american media and cultural bubbles), and given that the derivatives marketplace was spread horizontally (transnationally) more than it was spread vertically (not all banks for example played this game), it follows that concentration would be the outcome of this.

whether that is allowed to stand is a legislative/legal problem---so far things have been happening in a way that has totally bypassed congress, for example--the "imperial presidency" in it's "state of exception" mode has been lurching from crisis to crisis, acting in an entirely reactive manner, making shit worse when it was supposed to make shit better, etc etc etc....but this isn't over and it's possible that quite deep changes will comes about as the damage done not only by the crises but also by the attempts to limit the damage caused by the crises unfold.

this puts nation-states in an odd position.
it seems to militate for the formation of transnational regulatory bodies with actual enforcement powers and huge sums of capital.

Thanks for the outline, rb. I was perhaps too vague. My brain is a bit addled as I'm ridiculously busy these days.... but what I was trying to imply was that world markets are in the situation they are in because of American-born policy and theory. Much of what we see of neoliberalism and globalization found its start in American academia and policy experiments. It appears that over time, other markets have been infected by this. There is too much integration.

Besides the Americans (and Thatcher), who else has spearheaded this mode of economics at this scale? Everyone else simply followed suit. And why not? America's been the largest economy in the world for a long time now.

Look at what symbiosis can do to you when things go wrong...when things are structured poorly...and no one person (ie, nation-state) can fix it.

The Icelandic króna just lost another 2.5% yesterday. It's fallen a total of 32% in the last 6 months alone. Do you know what that means? Say that ktsp and I saved $1000 last year. Now, if we go back to the US and take that money with us, it's going to be worth $68. Now, multiply that several times and guess how we're feeling right now. And we haven't hit bottom yet.

I really don't think most Americans appreciate the fact that EVERYTHING that goes on their country, affects EVERYONE else in the rest of the world... and usually with an even heavier impact. I'm not saying that the Icelandic banks' over-buying of too many European companies (which are all now folding) isn't part of our currency devaluation, but the last few dives in currency value here have all happened after shit went down on Wall Street this year. As in, within 12 hours later. It's phenomenal how much impact it has.

I'm really wondering what the bottom of this is going to look like. I was asking ktsp last night as we fell asleep, "Do we REALLY want to go back to the US, given the economy right now?"--he has a perfect good job here, and so far quite a bit of security. I'm wary of what's happening back in WA state, where the jobless rate jumped from 4.something percent a few months ago, to 6.1% as reported yesterday. That's where we'd be moving to. They say that they've added hundreds of jobs in the software industry, which would be his field... but that can't go on forever, with this shit happening. It worries me, on a personal level... and on a global/national level, I can't even fathom what is going on.

I can already imagine this being written up in the history books a century from now... it's the beginning of something huge. And yet here we are, in an election where lipstick and farm animals and skin color are deciding factors for people. (and abortion? Are you kidding me? Get a grip, people!!! Take a look at the front page of your newspaper, for god's sake)