The Junk Credit Crisis

As we move forward with the “Homeland Security” series here at Insurgent American, one of the components of system-evolution that is being woven into this materialist conception of recent history is the increasingly dominant role of the financial pole of capital in the system and in the crisis of that system. This Counterpunch piece by Mike Whitney — using a libertarian POV, and without IA’s attention to gender and ecological factors — is a news flash from that crisis. Quoting von Mises and calling on support for prez-candidate Ron Paul is a dead giveaway on the libertarian orientation. Libertarians are gold bugs; and they have shown a past predisposition to the-sky-is-falling catastrophism. But the liquidity crisis is real, and it is ultimately unsustainable. Whitney’s contention that a couple trillion bucks worth of value was evaporated is true, even if Henry Liu has a better take on what this means: “devaluation camouflaged as growth”.

We have suggested before that there are points of convergence — in the practical political realm — between non-orthodox sections on the left and libertarians. Whitney calls for the abolition of the Federal Reserve. Libertarians agree, and also call for an end to all corporate subsidies, overt and covert, and for the immediate redeployment of all US force back to the United States. These are very good ideas, that would shift power wholly in favor of we lower classes in the long term. Do lefties and libertarians really need to agree on the why to work together on the how?

One plank on any political platform in the US worth its salt needs to be Jubilee — across-the-board mortgage-debt forgiveness for people meeting reasonable criteria who owe on their single homes. The criminal bankruptcy law passed by both parties in anticipation of this downfall (to facilitate massive re-po’s by the banks) has to be countered, and a place-to-stay Jubilee is the radical and logical solution. It’s a biblical concept within Judeo-Christianity, so there will be churches who back this — especially when it means everything to their soon-to-be economically-deracinated “middle-class” members. -SG

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Judgment Week on Wall Street

By MIKE WHITNEY

It’s a Bloodbath. That’s the only way to describe it.

On Friday the Dow Jones took a 280 point nosedive on fears that that losses in the subprime market will spill over into the broader economy and cut into GDP. Ever since the two Bears Sterns hedge funds folded a couple weeks ago the stock market has been writhing like a drug-addict in a detox-cell. Yesterday’s sell-off added to last week’s plunge that wiped out $2.1 trillion in value from global equity markets. New York investment guru, Jim Rogers said that the real market is “one of the biggest bubbles we’ve ever had in credit” and that the subprime rout “has a long way to go.”

We are now beginning to feel the first tremors from the massive credit expansion which began 6 years ago at the Federal Reserve.

The trillions of dollars which were pumped into the global economy via low interest rates and increased money supply have raised the nominal value of equities, but at great cost. Now, stocks will fall sharply and businesses will fail as volatility increases and liquidity dries up. Stagnant wages and a declining dollar have thrust the country into a deflationary cycle which has—up to this point—been concealed by Greenspan’s “cheap money” policy. Those days are over. Economic fundamentals are taking hold. The market swings will get deeper and more violent as the Fed’s massive credit bubble continues to unwind. Trillions of dollars of market value will vanish overnight. The stock market will go into a long-term swoon.

Ludwig von Mises summed it up like this:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” (Thanks to the Daily Reckoning)

It doesn’t matter if the “underlying economy is strong”. (as Henry Paulson likes to say) That’s nonsense. Trillions of dollars of over-leveraged bets are quickly FULL ARTICLE

Posted by stan in Analysis