This link to a recent article by Henry C. K. Liu explains (albeit in the arcana of high finance) what a liquidity crisis is; and where it is likely to lead… soon. What does that mean for us? It means get as independent as we can, as soon as we can, of the financial-industrial grid. This is a community, not an individual, effort.
US Economy: Liquidity boom and looming crisis
by Henry C.K. Liu
Economic growth in the US slowed to 1.3% in the first quarter (Q1) of 2007, the worst performance in four years of an overextended debt bubble. Yet the Dow Jones Industrial Average (DJIA) rose to an all-time intra-day high of 13,284.53 to close at 13,264.62 last Friday, rising more than 1,000 points or 9% in the same period.
The DJIA is now 82% higher than its low of 7,286.27 on October 9, 2002, during which US gross domestic product (GDP) grew only 38%.
The 10-year cycle of financial crises
The historical pattern of a 10-year rhythm of cyclical financial crises looms as a menacing storm cloud over the financial markets.
The 30% US market crash of 1987, in which investors lost 10% of 1987 GDP, was set off by the 1985 Plaza Accord to push down the Japanese yen with an aim of reducing the growing US trade deficit with Japan. The 1987 crash was followed 10 years later by FULL
IA NOTE: Michael Hudson once wrote me in an email — after I’d been complaining about how difficult it was to follow the threads of financial analysis — that leftists are not generally “wired” to understand finance… that it functions almost as another language. I’d extend his remarks to more than just leftists. Like any new language (and this one is vitally important if we are to understand power in this new eopch of exterminism), repeated exposure, from varying facets, eventually renders the unfamiliar more familiar. So here is a link to a 1998 essay — written in language very familiar to the left — by Loren Goldner, on the emerging liquidity crisis. I hope it’s helpful. This is extremely important; because the wreckage of this hyper-reified system — even if the language is cripplingly arcane and often boring — is likely to be unimaginable.
Posted by stan in Analysis