Get Ready for World Depression, Regional Wars and the Decline of the US Empire?

Ah, my hero, Hank Greenberg, the savior of our American financial system (according to Charlie Rose at least) will finally be forced to testify under oath:

The former head of disgraced insurance giant AIG, Maurice "Hank" Greenberg," said in an interview published Thursday he did not "feel any responsibility at all" for the company's problems. Greenberg, 83, was set to testify Thursday before a Congressional committee, his first public appearance under oath since the government's first bailout of the firm in September.

Do you think he'll say anything truly informative? Henry Blodget finally reaches the print medium with the question I've been asking since that first ridiculous Bush/Paulson TARP scare tactic (planned months in advance), back on that crisp pre-election September afternoon, that began the final descent of all we used to hold sacred (our economic well being) (emphasis marks added for your further amusement):

. . . there's one question (Geithner) still refuses to answer. Why is he bailing out the people who lent trillions of dollars to our now-insolvent banks? Each of the financial institutions that Geithner is desperate to bail out has tens or hundreds of billions of dollars that could be used to cover losses before the taxpayer had to cough up a dime. And with the exception of Lehman Brothers (and, now, General Motors), Geithner has protected these gigantic pools of money to the tune of 100 cents on the dollar. Who are these people? The bondholders. The folks who lent AIG, Citigroup, Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac, and other disasters the hundreds of billions of dollars that they subsequently vaporized. In any fair world, the bondholders would lose everything before any taxpayer money was put on the line. Ever since Lehman Brothers, however, Tim Geithner & Co. have been so afraid of a Lehman-repeat that they refuse to even publicly discuss the possibility of making bondholders share the pain. Whenever anyone suggests this idea, moreover, Geithner & Co. immediately dismiss it by saying it would lead to another Lehman. At best, this is wrong. At worst, it's disingenuous. The reason Lehman caused such havoc was that it was an uncontrolled and unexpected bankruptcy. No one is suggesting that AIG, Citi, et al, be forced into one of those. What LOTS of people are suggesting, including Paul Krugman, is that Citi, et al, be put into a managed receivership. This is what happened to WaMu last fall, and the process went so smoothly that few folks can even remember it. WaMu bondholders took a hit. General Motors bondholders will take a hit. So why can't the bondholders of Citi, AIG, etc, take a hit? The answer, Tim Geithner would probably tell you (if he could be induced to comment on the elephant in the room) is that insurance companies, pension funds, and other companies that hold the future of Americans in their hands invest in those bonds. And if we force those companies to take a loss, we'll hurt ordinary Americans. Which is just another way of saying "all financial sector debt has always had a Triple A rating like Treasury bonds - you were just too stupid to notice." And that's ridiculous. The folks who lent money to AIG, Citi, etc., knew exactly what risks they were taking. It's time to at least discuss the possibility that they should have to answer for this.

And if you didn't see it on Sunday with George, Paul Krugman, in the minute he was allotted to try to clear up the Geithner fog before Cokie F. Roberts (the seer of MSM) interrupted again, slipped this one in (try to ignore the grating advertisements):

"It's a plan to rearrange the deck chairs and hope that that keeps us from hitting the iceberg," the Nobel Prize-winning economist said of Geithner's bank plan. "They've done some things very fast, but they've been very small things ... There's no way this could be enough."

And who can believe this is not an April Fool tidbit?

There were startling new developments on Wednesday in a case of alleged political prosecution of a Mississippi attorney. Once-prominent attorney Paul Minor, jailed on charges of bribery, has alleged that his prosecution was politically motivated and timed to Mississippi's gubernatorial elections. He has also alleged that there was direct involvement by former Bush White House Deputy Chief of Staff, Karl Rove.

Read the rest of this bit of non-humor (and none too soon news) here. The Rude Pundit is always more than just rude. Sometimes he's humorously vulgar, often shamelessly profane and just about always as politically telling as a point-blank shot to the heart. (Of the bad guys in our continuing "western" melodrama, of course.) I love this guy and recommend him as a part of your daily (opinion) diet.

There's a couple of things that Republicans (and, really, most Democrats, including the President) need to realize about the public right now. First off, we want some fuckin' blood. It's time to purge some motherfuckers, time to fuck up the lives of some rich bastards. Back when Enron crumbled, the only thing that stopped riots in the streets of Houston was the fact that Ken Lay was being chased like a plague rat. Firing the CEO of GM was a start. Now, as a condition of bailouts, there needs to be more public pantsing of other top execs (not low-level lackeys) in all the collapsing industries that are dragging us down into the big suck they've created. If we can frog walk a couple of 'em, all the better. Everyone from Joes that are real plumbers to Mary Janes that stock the shelves at Wal-Mart know that if you fuck up, you get fired. So it should be for Wall Street, so it should be for GM and Chrysler. You wanna restore some faith in the American economy? Consequences for actions are easy steps to take. The other thing is that Americans, for the most part, are ready for something transformatively new, some new idea, some theory that tells us where we came from and where we're gonna go and how we might get there. Everything the administration is doing right now seems like so many pieces held together by scotch tape, chewing gum, and a prayer. While people trust Obama in an almost surreal way, the President's got to offer a controlling concept to his plans. If he has one beyond, "Holy fuck, we gotta do something," he has yet to articulate it. . . . There's a great line in the 1995 play Slavs! by Tony Kushner. It's when the world's oldest Bolshevik, speaking in 1985 about the coming collapse of the Soviet Union, says, "Change? Yes, we must change, only show me the Theory, and I will be at the barricades, show me the book of the next Beautiful Theory, and I promise you these blind eyes will see again, just to read it, to devour that text. Show me the word that will reorder the world, or else keep silent." The Rude Pundit quotes this not to condemn Obama's ideas (or to support the USSR), but to ask for the ideology beyond the notions of "change" that excited us and got us here.

Professor James Petras in Global Research puts our recent cataclysmic economic events into deep perspective. And you may think it fiction (or science fiction). But you didn't really believe Bush and Paulson's cries of surprise and disbelief emitted just before they exited stage right with the rest of your money, did you? (Emphasis marks inserted for your added enjoyment - Ed.) "What was erroneously dubbed a financial crisis or even more narrowly a “mortgage” or housing crisis, was merely the “trigger” for the collapse of the overdeveloped financial sector."

All the idols of capitalism over the past three decades crashed. The assumptions and presumptions, paradigm and prognosis of indefinite progress under liberal free market capitalism have been tested and have failed. We are living the end of an entire epoch: Experts everywhere witness the collapse of the US and world financial system, the absence of credit for trade and the lack of financing for investment. A world depression, in which upward of a quarter of the world’s labor force will be unemployed, is looming. The biggest decline in trade in recent world history – down 40% year to year – defines the future. The immanent bankruptcies of the biggest manufacturing companies in the capitalist world haunt Western political leaders. The ‘market’ as a mechanism for allocating resources and the government of the US as the ‘leader’ of the global economy have been discredited. (Financial Times, March 9, 2009) All the assumptions about ‘self-stabilizing markets’ are demonstrably false and outmoded. The rejection of public intervention in the market and the advocacy of supply-side economics have been discredited even in the eyes of their practitioners. Even official circles recognize that ‘inequality of income’ contributed to the onset of the economic crash and should be corrected. Planning, public ownership, nationalization are on the agenda while socialist alternatives have become almost respectable. With the onset of the depression, all the shibboleths of the past decade are discarded: As export-oriented growth strategies fail, import substitution policies emerge. As the world economy ‘de-globalizes’ and capital is ‘repatriated’ to save near bankrupt head offices – national ownership is proposed. As trillions of dollars/Euros/yen in assets are destroyed and devalued, massive layoffs extend unemployment everywhere. Fear, anxiety and uncertainty stalk the offices of state, financial directorships, the office suites the factories, and the streets . . . . We enter a time of upheaval, when the foundations of the world political and economic order are deeply fractured, to the point that no one can imagine any restoration of the political-economic order of the recent past. The future promises economic chaos, political upheavals and mass impoverishment. Once again, the specter of socialism hovers over the ruins of the former giants of finance. As free market capital collapses, its ideological advocates jump ship, abandon their line and verse of the virtues of the market and sing a new chorus: the State as Savior of the System - a dubious proposition, whose only outcome will be to prolong the pillage of the public treasury and postpone the death agony of capitalism as we have known it. The failed economic policies of political and economic leaders are rooted in the operation of markets – capitalism. To avoid a critique of the capitalist system, writers are blaming the leaders and financial experts for their incompetence, ‘greed’ and individual defects. Psychobabble has replaced reasoned analysis of structures, material forces and objective reality, which drive, motivate and provide incentives to investors, policy makers and bankers. When capitalist economies collapse, the gods drive the politicians and editorial columnists crazy, depriving them of any capacity to reason about objective processes and sending them into the wilderness of subjective speculation. Instead of examining the opportunity structures created by enormous surplus capital and the real existing profit margins, which in (turn) drive capitalists into financial activity, we are told it was ‘the failure of leadership’. Instead of examining the power and influence of the capitalist class over the state, in particular the selection of economic policy-makers and regulators who would maximize their profits, we are told there was a ‘lack of understanding’ or ‘willful ignorance of what markets need’. Instead of looking at the real social classes and class relations – specifically the historically existing capitalist classes operating in real existing markets - the psycho-babblers posit an abstract ‘market’ populated by imaginary (‘rational’) capitalists. Instead of examining how rising profits, expanding markets, cheap credit, docile labor, and control over state policies and budgets, create ‘investor confidence’, and, in their absence, destroy ‘confidence’, the psychobabblers claim that the ‘loss of confidence’ is a cause for the economic debacle. The objective problem of loss of specific conditions, which produce profits, as leading to the crisis, is turned into a ‘perception’ of this loss. Confidence, faith, hope, trust in capitalist economies derive from economic relations and structures which produce profits. These psychological states are derivative from successful outcomes: Economic transactions, investments and market shares that raise value, multiply present and future gains. When investments go sour, firms lose money, enterprises go bankrupt, and those prejudiced ‘lose confidence’ in the owners and brokers. When entire economic sectors severely prejudice the entire class of investors, depositors and borrowers, there is a loss of ‘systemic confidence.’ Psychobabble is the last resort of capitalist ideologues, academics, experts and financial page editorialists. Unwilling to face the breakdown of real existing capitalist markets, they write and resort to vague utopias such as ‘proper markets’ distorted by ‘certain mindsets’. In other words, to save their failed ideology based on capitalist markets, they invent a moral ideal the ‘proper capitalist mind and market’, divorced from real behavior, economic imperatives and contradictions embedded in class warfare. The inadequate and shoddy economic arguments, which pervade the writing of capitalist ideologues parallels the bankruptcy of the social system in which they are embedded. The intellectual and moral failures of the capitalist class and their political followers are not personal defects; they reflect the economic failure of the capitalist market. The crash of the US financial system is symptomatic of a deeper and more profound collapse of the capitalist system that has its roots in the dynamic development of capitalism in the previous three decades. In its broadest terms, the current world depression results from the classic formulation outlined by Karl Marx over 150 years ago: the contradiction between the development of the forces and relations of production. Contrary to the theorists who argue that ‘finance’ and ‘post-industrial’ capitalism have ‘destroyed’ or de-industrialized the world economy and put in its place a kind of “casino” or speculative capital, in fact, we have witnessed the most spectacular long-term growth of industrial capital employing more industrial and salaried workers than ever in history. Driven by rising rates of profit, large scale and long-term investments have been the motor force for the penetration by industrial and related capital of the most remote underdeveloped regions of the world. New and old capitalist countries spawned enormous economic empires, breaking down political and cultural barriers to incorporating and exploiting billions of new and old workers in a relentless process. As competition from the newly industrialized countries intensified, and as the rising mass of profits exceeded the capacity to reinvest them most profitably in the older capitalist centers, masses of capital migrated to Asia, Latin America, Eastern Europe, and to a lesser degree, into the Middle East, Southern Africa. Huge surplus profits spilled over into services, including finance, real estate, insurance, large-scale real estate and urban lands. The dynamic growth of capitalism’s technological innovations found expression in greater social and political power – dwarfing the organization of labor, limiting its bargaining power and multiplying its profits. With the growth of world markets, workers were seen merely as ‘costs of production’ not as final consumers. Wages stagnated; social benefits were limited, curtailed or shifted onto workers. Under conditions of dynamic capitalist growth, the state and state policy became their absolute instrument: restrictions, controls, regulation were weakened. What was dubbed “neo-liberalism” opened new areas for investment of surplus profits: public enterprises, land, resources and banks were privatized. As competition intensified, as new industrial powers emerged in Asia, US capital increasingly invested in financial activity. Within the financial circuits it elaborated a whole series of financial instruments, which drew on the growing wealth and profits from the productive sectors. US capital did not ‘de-industrialize’ – it relocated to China, Korea and other centers of growth, not because of “falling profits” but because of surplus profits and greater profits overseas. Capital’s opening in China provided hundreds of millions of workers with jobs subject to the most brutal exploitation at subsistence wages, no social benefits, little or no organized social power. A new class of Asian capitalist collaborators, nurtured and facilitated by Asian state capitalism, increased the enormous volume of profits. Rates of investments reached dizzying proportions, given the vast inequalities between income/property owning class and wageworkers. Huge surpluses accrued but internal demand was sharply constrained. Exports, export growth and overseas consumers became the driving force of the Asian economies. US and European manufacturers invested in Asia to export back to their home markets – shifting the structure of internal capital toward commerce and finance. Diminished wages paid to the workers led to a vast expansion in credit. Financial activity grew in proportion to the entrance of commodities from the dynamic, newly industrialized countries. Industrial profits were re-invested in financial services. Profits and liquidity grew in proportion to the relative decline in real value generated by the shift from industrial to financial/commercial capital. Super profits from world production, trade, finances and the recycling of overseas earnings back to the US through both state and private financial circuits created enormous liquidity. It was far beyond the historical capacity of the US and European economies to absorb such profits in productive sectors. The dynamic and voracious exploitation of the huge surplus labor forces in China, India, and elsewhere and the absolute pillage and transfer of hundreds of billions from ex-communist Russia and ‘neo-liberalized’ Latin America filled the coffers of new and old financial institutions. Over-exploitation of labor in Asia, and the over-accumulation of financial liquidity in the US led to the magnification of the paper economy and what liberal economist later called “global disequilibrium” between savers/industrial investors/ exporters (in Asia) and consumers/financiers/importers(in the US). Huge trade surpluses in the East were papered over by the purchase of US T-notes. The US economy was precariously backed by an increasingly inflated paper economy. The expansion of the financial sector resulted from the high rates of return, taking advantage of the ‘liberalized’ economy imposed by the power of diversified investment capital in previous decades. The internationalization of capital, its dynamic growth and the enormous growth of trade outran the stagnant wages, declining social payments, the huge surplus labor force. Temporarily, capital sought to bolster its profits via inflated real estate based on expanded credit, highly leveraged debt and outright massive fraudulent ‘financial instruments’ (invisible assets without value). The collapse of the paper economy exposed the overdeveloped financial system and forced its demise. The loss of finance, credit and markets, reverberated to all the export-oriented industrial manufacturing powers. The lack of social consumption, the weakness of the internal market and the huge inequalities denied the industrial countries any compensatory markets to stabilize or limit their fall into recession and depression. The dynamic growth of the productive forces based on the over-exploitation of labor, led to the overdevelopment of the financial circuits, which set in motion the process of ‘feeding off’ industry and subordinating and undermining the accumulation process to highly speculative capital. Cheap labor, the source of profits, investment, trade and export growth on a world scale, could no longer sustain both the pillage by finance capital and provide a market for the dynamic industrial sector. What was erroneously dubbed a financial crisis or even more narrowly a “mortgage” or housing crisis, was merely the “trigger” for the collapse of the overdeveloped financial sector. The financial sector, which grew out of the dynamic expansion of ‘productive’ capitalism, later ‘rebounded’ against it. The historic links and global ties between industry and financial capital led inevitably to a systemic capitalist crisis, embedded in the contradiction between impoverished labor and concentrated capital. The current world depression is a product of the ‘over-accumulation’ process of the capitalist system in which the crash of the financial system was the ‘detonator’ but not the structural determinant. This is demonstrated by the fact that industrial Japan and Germany experienced a bigger fall in exports, investments and growth than ‘financial’ US and England. The capitalist system in crisis destroys capital in order to ‘purge itself’ of the least efficient, least competitive and most indebted enterprises and sectors, in order to re-concentrate capital and reconstruct the powers of accumulation – political conditions permitting. The re-composition of capital grows out of the pillage of state resources – so-called bailouts and other massive transfers from the public treasury (read ‘taxpayers’), which results from the savage reduction of social transfers (read ‘public services’) and the cheapening of labor through firings, massive unemployment, wage, pension and health reductions and the general reduction of living standards in order to increase the rate of profit.

Read the rest here (if you can stand it). Relax. It'll all be over soon. Suzan _____________________________