Roots of the Economic Crisis

Historical Roots of the Economic Crisis Jack Rasmus is interviewed by ‘Z’ Magazine for a full hour following his presentation at the Left Forum in New York City on April 18, 2009. In the interview Jack provides a comprehensive view of the current economic crisis to date, explains why the latest version of the Obama-Geithner recovery plan will not work, and why, despite all the talk about ‘green shoots’ and ‘glimmers of recovery, the real economy will continue to deteriorate beneath the surface. Jack predicts an even more serious stage of the crisis will erupt in 2010, why more than 20 million will lose their jobs this year, why business defaults will accelerate, housing prices will continue to fall, and why the central locus of the crisis is now shifting from the financial to the non-financial sector of the economy. Jack also places the crisis in historical perspective, explaining how the current Epic recession is similar and different from the 1930s, dispels some of the myths about the ‘New Deal’ of that period, and how the current crisis may transition to a bona fide global Depression. <!– The Camtasia Studio video content presented here requires a more recent version of the Adobe Flash Player. If you are you using a browser with JavaScript disabled please enable it now. Otherwise, please update your version of the free Flash Player by downloading here. <!– <!– Users looking for simple object / embed tags can copy and paste the needed tags below. –>

Click here to watch: http://www.kyklosproductions.com/video/historical_roots/historical_roots.html

Is the Economic crisis really over?

Commercial paper spreads have come down dramatically. Libor rates are (hmm – almost) back to normal. Even high yield spreads are narrowing. It certainly appears as if the credit crisis is well and truly over or, at the very least, the light which most of us think we can see at the end of the tunnel is no longer that of an oncoming freight train.

No wonder equities are currently enjoying one of their best spells ever. And while equities continue to go up and up, most of us are left scratching our heads. Is this the real thing or will it go down in history as ‘just’ another bear market rally? Not so long ago, the entire financial system stared Armageddon in the face. Now, only a few months later, equity markets behave as if all the worries of yesterday have been washed away. How is that possible?

The great bank illusion

The current bull market began in earnest in the second week of March, but what really got everyone going were the surprisingly good Q1 US bank earnings which were reported during the first half of April. Most commentators interpreted the numbers as the clearest piece of evidence yet that we are now firmly on the road to recovery.

Of course US banks made good money in Q1. The environment created for them is the equivalent of the US government reducing the cost of goods to zero for its embattled car manufacturers and then going on to buy – courtesy of the US tax payer – a couple of million cars that nobody really needs. Even Detroit would make money given those conditions!

Liquidity is trapped

IMPORTANT READING

The Crimes of Wall Street

So many of us know in detail about all the false warnings and exaggerated claims that were used to justify the war in Iraq. By now, six years later, and after many books, reports, news stories and films (hopefully including my two books and film, Weapons of Mass Deception), we see the pattern of lies and deception. We realize what a fraud was committed against the American people and what its consequences have been for the people of this country, Iraq and Afghanistan.

For many of the righteous among us who thunder against these lies, there seems to be a lack of curiosity about the costly frauds that flushed our own economy down the toilet. Here too, there is a tendency to focus blame on politrick(ians), and not look at the larger fraud behind the fraud, in part , because most economists and media outlets minimize its role.

First, its clear that, like on the war, government officials did mislead us, from original deregulators in the Carter-Reagan years to the financial “modernizers of the Clinton-Bush 2 era with their refusal to accept responsibility for the consequences of their free market fantasies, the gutting of rules and regulations and embrace of a phony “ownership society.”

It is also now easy to blame the now self admitted “naivete” of Fedhead Alan Greenspan or the continued arrogance and bluster of Democrat turned Republican Phil Gramm who killed Glass Steagall and called fighters against predatory lenders “terrorists.” It equally easy to scorn those who claim that our government is a “tyranny” and call Obama a flaming Socialist

Flash back with me now to March 2007, just a few months before the markets melted down. Slate reported then on testimony by the two top economy watchers in America. They insisted that problems that were unleashed like a tsunami had been “contained.”

“Testifying on March 28, Ben Bernanke said, “At this juncture…the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.” The same day, Treasury Sec Henry Paulson told the House of Representatives that “from the standpoint of the overall economy, my bottom line is we’re watching it closely but it appears to be contained.”

Russia Dumps US Dollar

The US dollar is not Russia’s basic reserve currency anymore. The euro-based share of reserve assets of Russia’s Central Bank increased to the level of 47.5 percent as of January 1, 2009 and exceeded the investments in dollar assets, which made up 41.5 percent, The Vedomosti newspaper wrote.

The dollar has thus lost the status of the basic reserve currency for the Russian Central Bank, the annual report, which the bank provided to the State Duma, said.

In accordance with the report, about 47.5 percent of the currency assets of the Russian Central Bank were based on the euro, whereas the dollar-based assets made up 41.5 percent as of the beginning of the current year. The situation was totally different at the beginning of the previous year: 47 percent of investments were made in US dollars, while the euro investments were evaluated at 42 percent.

Financial Implosion and Stagnation Ahead

But, you may ask, won’t the powers that be step into the breach again and abort the crisis before it gets a chance to run its course? Yes, certainly. That, by now, is standard operating procedure, and it cannot be excluded that it will succeed in the same ambiguous sense that it did after the 1987 stock market crash. If so, we will have the whole process to go through again on a more elevated and more precarious level. But sooner or later, next time or further down the road, it will not succeed… We will then be in a new situation as unprecedented as the conditions from which it will have emerged.
—Harry Magdoff and Paul Sweezy (1988) 1

“The first rule of central banking,” economist James K. Galbraith wrote recently, is that “when the ship starts to sink, central bankers must bail like hell.”2 In response to a financial crisis of a magnitude not seen since the Great Depression, the Federal Reserve and other central banks, backed by their treasury departments, have been “bailing like hell” for more than a year. Beginning in July 2007 when the collapse of two Bear Stearns hedge funds that had speculated heavily in mortgage-backed securities signaled the onset of a major credit crunch, the Federal Reserve Board and the U.S. Treasury Department have pulled out all the stops as finance has imploded. They have flooded the financial sector with hundreds of billions of dollars and have promised to pour in trillions more if necessary—operating on a scale and with an array of tools that is unprecedented.

In an act of high drama, Federal Reserve Board Chairman Ben Bernanke and Secretary of the Treasury Henry Paulson appeared before Congress on the evening of September 18, 2008, during which the stunned lawmakers were told, in the words of Senator Christopher Dodd, “that we’re literally days away from a complete meltdown of our financial system, with all the implications here at home and globally.” This was immediately followed by Paulson’s presentation of an emergency plan for a $700 billion bailout of the financial structure, in which government funds would be used to buy up virtually worthless mortgage-backed securities (referred to as “toxic waste”) held by financial institutions. 3

Very Important Reading: Internet Threatened by Censorship

At a time of corporate dominated media, a free and open Internet is democracy’s last chance to preserve our First Amendment rights without which all others are threatened. Activists call it Net Neutrality. Media scholar Robert McChesney says without it “the Internet would start to look like cable TV (with a) handful of massive companies (controlling) content” enough to have veto power over what’s allowed and what it costs. Progressive web sites and writers would be marginalized or suppressed, and content systematically filtered or banned.

Media reform activists have drawn a line in the sand. Net Neutrality must be defended at all costs. Preserving a viable, independent, free and open Internet (and the media overall) is essential to a functioning democracy, but the forces aligned against it are formidable, daunting, relentless, and reprehensible. Some past challenges suggest future ones ahead.

Censorship Attempts to Curtail Free Expression

The Latest in Junk Economics for Solution of the Financial Crisis

Marginalist Panaceas to Today’s Structural Problems

It looks like bookstores are about to be swamped this summer and fall by a forest of advice for which publishers gave respectable advances a year ago as the economy was going off the rails. Seeking to minimize the risk of cognitive dissonance, the marketing strategy seems to be to offer advice by well-placed or celebrity insiders on how to recover the kind of free lunch that American pension plans – and popular hopes for easy wealth – have long assumed to be part of the natural law of economic growth, if only it can be better managed. The fantasy people want to buy is that the happy 1981-2007 era of debt-leveraged price gains for real estate, stocks and bonds can be brought back. But the Bubble Economy was so debt-leveraged that it cannot reasonably be restored. This means that publishers have achieved the marketer’s dream of planned obsolescence: Readers a year or so from now will have to buy a new slew of books as they feel hungry again from the lack of intellectual protein.

For the time being we are supposed to be satisfied Wall Street defenses of the Bush-Obama (Paulson-Geithner) attempt to re-inflate the Bubble by a bailout giveaway that has tripled America’s national debt in the hope of getting bank credit (that is, more debt) growing again. The problem is that debt leveraging is what caused the economic collapse. A third of U.S. real estate is now estimated to be in negative equity, with foreclosure rates still rising. So publishers have only a short window of opportunity to sell the current spate of books before people wake up to the fact that attempts to renew the Bubble Economy will make our financial overhead heavier.

A Truly National Banking System Reviewing Ellen Brown’s “Web of Debt:” Part VI

This is the sixth and final article on Ellen Brown’s superb 2007 book titled “Web of Debt,” now updated in a December 2008 third edition. It tells “the shocking truth about our money system, (how it) trapped us in debt, and how we can break free.” This article focuses on establishing a people-oriented banking system. It’s high time we had one and reclaimed what’s rightfully ours.

Restoring National Sovereignty with A Truly National Banking System

One serving everyone, not powerful moneychangers alone, the so-called Money Trust cartel of Wall Street bankers looting the national wealth for themselves and heading the country for bankruptcy, tyranny and ruin. Stopping them is Job One, and only mass activist outrage can do it.

At the Chicago Democratic National Convention, William Jennings Bryan won the nomination saying:

“(W)e believe that the right to coin money and issue money is a function of government….I stand with Jefferson (and say), as he did, that the issue of money is a function of the government and that banks should go out of the governing business….(W)hen we have restored the money of the Constitution, all other necessary reforms will be possible, and….until that is done there is no reform that can be accomplished.”

No Fed existed at that time. If one did and operated like today, Bryan would have said abolish it or make it truly federal. As a US government agency, money created would go directly to the Treasury. But that’s only 3% of the money supply. What about the other 97% in the form of commercial loans? Would that put government in the commercial lending business?

“Perhaps, but why not. As Bryan said, banking is the government’s business, by Constitutional mandate” – at least the part of it involved in creating new money. The rest could be in private hands, like today – through banks and other financial institutions, such as finance companies, pension and mutual funds, insurance companies, and securities dealers. “These institutions do not create the money they lend but merely recycle pre-existing funds.” With government printing money, banks would become more equitable recyclers – “borrowing money at a low rate and lending it at a higher one,” except for one downside. Some would go bankrupt, but start-ups would replace them under a more stable and equitable system.

Obama Betrays The Liberals

American liberals stand betrayed. Their new president, the one they sweated to elect—-a brilliant, charismatic leader with a professional background in constitutional law—has transmogrified himself from the champion who denounced in his campaign the illegalities of the Bush White House into a president bent on their perpetuation.

Liberals are stunned by Obama’s plan to “restart Bush-era military tribunals” for some Guantanamo detainees, reviving what the Associated Press pointed out, is “a fiercely disputed trial system he once denounced.”(May 15). Liberals are appalled by Obama’s May 21st proposal to hold terrorism suspects in “prolonged detention” inside the U.S. without a trial. “Such detention,” Senator Russ Feingold (D-Wis.) wrote him, “is a hallmark of abusive systems that we have historically criticized around the world.”

If liberals chaffed over Obama’s centrist cabinet choices, they were dismayed by his decision not to release photographs depicting the sadistic tortures the Bush Gang inflicted on prisoners during a so-called “War on Terror” that was nothing but terror itself. A typical reaction comes from Joe Kishore, writing on the World Socialist Website (May 22): “Whatever verbal warnings Obama may make about the erosion of democracy in the United States, the actions of his administration facilitate and escalate its breakdown.”

Venezuela’s life expectancy among the highest in the Continent

Caracas, May 21. ABN.- Venezuela registers a life expectancy of 75 years, which is one of the highest rates in the American Continent as it was certified by the World Health Organization (WHO).

According to the World Health Report 2009, which was presented this Thursday in Geneva, Switzerland, the life expectancy of the citizens of North and South America is the world’s highest with an average of 76 years, followed by Europe and Eastern Pacific with an average of 74 years.

The Latin American nation with the highest life expectancy is Costa Rica with 79 years and the lowest Guyana with 60.

Venezuela stands out with 75 years, in joint with Uruguay and Argentina.

The study, based on data collected during 2007, assures that, when divided by gender, American women live an average of 78 years and men 76. The averages in women for Europe and the Pacific are 78 and 77, respectively.

Men live an average of 70 in Europe and 72 in the Pacific.

The average for the Southeastern Asia is 65 years, 64 for the Eastern Mediterranean and 52 in Africa.

Recently, the President of the Venezuelan National Institute of Statistics (INE, Spanish abbreviation), Elias Eljuri held that this indicator suggests considerable improvements not only on the life expectancy, but in the quality and level of life of the population.

He assured this is a consequence of the policies and social missions carried out by the National Government, such as the food supply network Mercal, health missions like Barrio Adentro and the School Food Program, among other.

Furthermore, he reminded that the Bolivarian Government has built, in its 10 years of administration, 7,492 hospitals, 6,462 popular outpatient clinics, 64 Integral Diagnosis Centers, 542 Integral Rehabilitation Centers and 23 High-Tech Centers.

“Population is being benefited significantly, especially the sector with less resources that are receiving support from the State on the health area as never before,” Eljuri said.