Thursday, April 22, 2010

We are entering a New Age of World Austerity

Written by Rob Sewell
Wednesday, 21 April 2010

Photo by Dorothea Lange

As the world economy emerges from recession it is clear that the recovery is going to be weak. All governments also face a huge debt overhang, which means that whoever is in power will have to carry out stringent economic measures and it is the working class who will be made to pay. This opens up the prospect of huge class contradictions opening up in the coming period.

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roman said...

It is starting to become evident now after much research and reportage that the trigger for the world wide financial collapse was "an effort by class-focused social engineers" to make home ownership more achievable to the "have-nots". It started during the Carter administration and was ramped up by Clinton and Bush.
Basically, under the guise of making home ownership more achievable and getting rid of the so-called curse of "red-lining" by banks, the government intimidated the banks and financial organizations into loosening their credit worthiness guidelines.
So what happened? A few deserving poor folks did get homes and so did a lot of predatory types looking to "game" the system and they thought they got away with it. All was fine while the housing bubble grew but once it blew both the deserving poor folks and the gamers literally walked away from their "underwater" home investments. The attempt at “helping” the underprivileged became their worst nightmare.
This caused the entire house of cards (mortgage backed securities) to collapse and now our political class is trying to pick up the pieces by deferring debts indefinitely to maintain the charade of life-style normalcy and prevent mass panic.
It was the attempt at social engineering by leftist members of the government in conjunction with misguided week-minded career political hacks that brought a once-thriving capitalist system to its knees. It's not the Capitalist system that is to blame. It is the "tinkering" by liberal socialist zealots who have infiltrated the halls of Congress over the past forty years or so.
Please, if there is another more compelling trigger for this financial catastrophe, I would like to hear it.

Frank Partisan said...

It is much bigger than a crisis of credit. Ending red-lining was one side, there also was Bush's ownership society.

It's way bigger than a credit crisis. It's a worldwide crisis of over accumulation. Capitalism has to destroy the means of production, close down plants, while needs remain stagnant.

K. said...

The problem with roman's argument is that it assumes that poor people have the financial presence to bring about a collapse. Any number of economists have debunked the myth that the poor caused the housing collapse. The truth is that what little wealth they had was strip mined by predatory lending practices.

The party began winding down in this country with decline of unions and the export of manufacturing jobs that paid well and offered good benefits. The erosion of the middle class was masked somewhat by cheap energy prices, increased defense spending, the dot com boom, and the advent of the two-income family. But the stagnation of wages over the last fifteen years, caused in large part by rising health care costs, left millions of people ill-prepared to deal with an economic downturn.

It's hard to see how the recovery will be anything but slow, no matter how hard the teabaggers stomp their feet. There is no dot com boom on the horizon. The manufacturing jobs are gone and they are not coming back. The short term answer is to relieve the disproportionately high tax burden on the middle class by raising the upper tax bracket and by closing corporate tax loopholes.

Republicans -- motivated by power and ideology instead of pragmatism -- will complicate this by fighting a pitched battle for free market supremacy. They're caught in an economic LaBrea tar pit, but the right-wing media echo chamber and the MSM's horse race coverage will distract from the failure of their policies.

tony said...

I Agree With Your Article 100% .But So What?
I dont recogise K's "The erosion of the middle class" here in UK.The burden has been placed soley on The Working Class here.
This has resulted not in the rise of The Left but a working class swing of support to The Facist Right (eg The BNP)
also a distancing (in Public at least) from the US.Partly because the US is seen as the cause of this Depression and because of dragging Britain into two stupid Wars.
Rather than people awakening to see the universal nature of this collapse Britain is retreating into isolation with no strong leadership from anyone (with a few honorable eceprtions) on the Left.Blair's true legacy!Tell Me It Aint So!
It's a bit of a mess really!

SecondComingOfBast said...

What goes up must come down. I know that sounds simplistic, but basic truths usually are. Although I don't have much of an audience, even before I was a blogger (or even before I knew what the fuck blogging was) I predicted the end of the dot com boom, and I predicted the collapse of the housing bubble a good four years before it happened.

How can anybody be so stupid as to think housing prices will just keep constantly rising with no end in sight? I have a small little five room house, seven if you count a "utility room" and the one small bathroom, which sits on a quarter acre lot. So I guess by all rights, I should be able to get what-ten, twenty, thirty million dollars for it in about thirty years, right? If only these people just hadn't screwed up and caused the joy ride to come to an end.

People that think like that have got to be fucking idiots. Seriously, how else can you describe them?

Nor is this a problem of capitalism. You would have the same phenomenon in one way or another under any kind of economic system. What's so hard to figure out about this? Bitching about this is like a herd of elk bitching about a shortage of foliage in dry years. You just move on and adapt.

Where Obama and the Democrats screwed up is not because they pumped money into TARP, where they royally screwed up was in targeting such a large percentage of their "economic stimulus" into crap that didn't have jack shit to do with job creation but can best be described as your typical pay-offs to democratic constituencies. If they had kept it focused in the way they tried to sell it, yes, a lot of people would have still complained, and I would probably still be one of them about some aspects, but this Tea-Party phenomenon would not have half the gravitas that it has now. It may not have even ever gotten off the ground.

Goldman Sachs screwed up royally and they deserve everything they got coming to them, but the people who are prosecuting them should save themselves a few bullets, just on the off-chance they might decide to do the honorable thing.

This is like the guards of the Nazi death camps being prosecuted by Himmler.

Tao Dao Man said...

I think the question that needs to be asked is.

Where these all mistakes after mistakes.
Was this by design.
Was it engineered?
This re-depression has proven a few things.
1. Unregulated Capitalism does not work.
2. Our Casino financial system is toxic to the world.
3. This will be the age of the G20, This is China's century, once again.

Frank Partisan said...

Citizen K: I agree with your analysis.

I would add that the credit to the poor, was part of Bush's "ownership society."

Roman is talking about a small part of the world economic crisis. My post is about the big picture.

Tony: In the US, what is called the middle class, overlaps with working class. It was a Cold war term, to confuse class consciousness.

RealityZone: Thank you for visiting.

I don't think this crisis was "engineered." It is not a desirable situation for a capitalist. The market economy has anarchistic manners.

I think China will be a major regional power, that is far away from the US as a world power.

Pagan: I can agree the TARP payments, could have been better used.

The right is correct, that there may not be $$ for another program like that, if another crash occurs soon.

The post is not about the housing crisis. No market only grows.

Anonymous said...

My Google account (and my blogs along with it) have been completely erased. I don't know by whom. Either a hacker or Google/Blogspot. Probably the latter, because I am trying to find out why, but they don't answer my queries. They would probably answer if it was a hacker.

Is there an anti-pornography crusade by Google or Blogspot that I didn't know about ?

Sonia Belle

Larry Gambone said...

This is truly disgusting and very disturbing, Sonia. I don't know what to think about who is behind it. About 6 years ago I happened to post my Web site URL's (four web sites) on and within two days all the web sites had disappeared. Netscape said they knew nothing about it. I suspect I was hacked by Neocons in this case, since was at this time under constant cyber attack.

Anonymous said...


In my particular case, I don't think it was hacking. I contacted Google/Blogspot. They completely ignored my questions. I think they are the ones who removed my blogs and my Google account. I don't know why. Maybe they got threats concerning the Mohammed cartoons (I had an old post with all of those cartoons). Maybe Google decided to remove them for their security, but they don't want to publicize it. So they ignored my questions in order not to lie.


Frank Partisan said...

Sonia: Your news is upsetting.

Ironically I was going to post tonight, about Iranian mullahs blaming earthquakes on women dressing without modesty. Monday is a worldwide day of protest, by dressing sexy. That post won't happen.

1) I sent you an invite to join my blog. You can use it as a forum to get your blog back.

2) Farmer John's blog is gone. No details.

3) I will visit some blogs involved with free speech fights.

roman said...

K and Ren,

"Media Matters" is K's source for accurate reportage on financial matters? Nice try.
Who needs a mortgage? Only the very poor? Of course not.
The overwhelming majority of us do not have the kind of money lying around to make a purchase of a home. In other words, almost everyone except the very rich need a loan to buy a home.
So, K's argument that just a "few poor folks" could not have caused the financial breakdown is an accurate statement but totally mis-charaterizes and mis-states my main argument. It was ALL the mortgagees who speculated and got the same "easy terms" designed by the "spread the wealth" crowd in Congress. We are really talking all mortgages and loans going back many years. We are talking trillions with a "T".
If we were to accept K's argument on its face, there would not be a need to bail out the banks and the freddies with "hundreds of billions" of dollars just because of a few poor folks' bad loans.
I do agree that there should be financial "regulations" and there are plenty of them. Now let's try to enforce them a little better than our immigration "regulations".

Ducky's here said...

For someone to think that the American financial system didn't have the wherewithal to cover loan defaults by CRA mortgage holders (who incidentally have a slightly lower than average default rate) indicates the utter abysmal state of Libertarian thought.

Your own guru, Alan "Free Chips" Greenspan stated that he was dead wrong in his belief that markets can't fail.

Now we have really had enough of this meme by Libertarians who won't admit that they have to make a serious adjustment in their thought after they watched the "free market"(LMAO) do boom-boom all over the rugs and the walls.

There is a worldwide financial collapse because CRA mortgage holders defaulted at lower than average rates. The shallowness of Libertarians is stunning and their unwillingness to take a look at operations like Coutrywide (which WERE NOT subject to CRA) is quite telling.

roman said...


Your interpretation of the CRA 's effect on the subprime debacle follows very closely that of uber-liberal and ultra-partisan Paul Krugman. You and Mr. Krugman must be kindred spirits.
Mr. Krugman employs a very narrow view of isolating subprime loans to CRA's only and completely excluding/ignoring the fact that this, in fact, became the catalyst for wider spread abuse is dishonest to say the least.
Tinkering was the TRIGGER and not the sole reason.
Stan Liebowitz, an economist with no axe to grind and no need to carry the water for the liberal establishment, employs logical inferences instead of "politically sensitive" ones as by your hero.
I'll go with logic instead of partisanship every time.

roman said...

Oops, CRA was the trigger...but tinkering still fits too.

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