Monday, January 26, 2009

The economy: it's worse than you think.

By Phoenix Insurgent

These are dark days. Capitalism continues to lurch deeper into crisis and even the giants of the economy don't seem to be immune from the steadily spreading pathogen of an economic system weakened by an addiction to debt and bubble economics. Greenspan, making his exit at the perfect moment, watches now from the sidelines as his free market fantasies dissolve before his eyes and our wallets.

Even this year's convocation of Capital's heavyweights in Davos -- in any other year an orgy of opulence and ostentation -- can't avoid the gloom and doom. As reported in the Wall Street Journal today,
"This may be the first Davos where capitalism is widely viewed as a failure, rather than something to be admired," says Ethan Kapstein, professor of economics and political science at French business school Insead, who has been going to Davos since 1994.


"The capitalist myth is lovely and youthful. It kicked off the industrial revolution, but maybe we need a new one," says Richard Olivier, son of the late British actor Sir Laurence Olivier. Mr. Olivier, who owns a company that gives seminars, will give a dinner talk on business leadership at Davos, based on Shakespeare's tragedy Macbeth. The tale shows a heroic soldier turned bad, led to self-delusion by his own ambition and greed -- think Lehman Brothers, says Mr. Olivier.
But many contradictions remain yet to be played out. The bankers have staged a major coup with the election of the Obama regime -- filling the highest ranks of the administration. And yet the capitalists in Davos tremble before the state, recognizing it as the only true source of capital these days.
This year, big government looks set to seize the Davos limelight from the banks, hedge funds and sovereign wealth funds that attracted attention in recent years. The reason for this change, economists say, is simple: The taxpayer now holds what money and power remain in an ailing global economy. Many big banks are on government life support and even state-controlled sovereign wealth funds aren't offering capital to struggling Western corporations.
Is it a coup or a last stand? Either way, it has all the characteristics of a robbery.

The TARP money, allegedly intended to restart lending, has instead gone into the pockets of the bankers, who have used it to bolster their bottom lines or to prey on their weakened competitors. Credit is drying up and fast.
Lending at many of the largest U.S. banks fell in recent months, the Wall Street Journal said, citing an analysis of banks that recently announced their quarterly results.

Ten of the 13 big beneficiaries of the U.S. Treasury Department's Troubled Asset Relief Program (TARP), saw their outstanding loan balances decline by a total of about $46 billion, or 1.4 percent, between the third and fourth quarters of 2008, according to the paper.

Those 13 banks have collected the lion's share of the roughly $200 billion the government has doled out since TARP was launched last October to stabilize financial institutions, the paper said.
But there is money to be had, if you've got connections. Pfizer recently got itself a $22.5 billion loan from a conglomeration of weakened banks.
"The money is there," said Ken Jaques, senior analyst at Informa. The banks "are just picking and choosing."

The five banks syndicating the bank debt also advised Pfizer on the takeover, a typical arrangement in big mergers.

And the deal shows where some of the capital injected into the banks under the Troubled Asset Relief Program is headed. Some Congressional lawmakers and President Barack Obama have criticized the banking industry for not using this capital to increase loans to consumers and businesses.
Consolidation is the watchword of the day, but that won't help you pay that mortgage. Don't expect the banks to spend much of that government capital to keep you in your house -- despite the already critical volume of foreclosed houses flooding the market. reports today that banks are holding massive amounts of reposessed homes off the market, perhaps as much as twice what is listed out of fear that such listings would collapse the market entirely.
The chief problem is probably system overload: Lenders are just not prepared to handle the sheer numbers of foreclosures that they have on their books. Banks took back about 860,000 in 2008 - more than twice the number in 2007 - according to RealtyTrac. Before the housing crisis hit, it took only about a month to get a bank-owned foreclosure on the market.

Lenders still insist they try to act as swiftly as possible. According to Tom Kelly, a spokesman for Chase (JPM, Fortune 500) Mortgage, their goal is to cut their losses on these homes, which are expensive to maintain, as fast as possible.

But banks might hold back listings in areas where they already have lots of homes for sale in order to avoid flooding the market, according to Michael Youngblood, a financial analyst and founder of Five Bridges Capital, an asset management company.

"If lenders have a significant number of properties in a limited area, they may want to stagger putting them back on the market," he said.
With three million foreclosures last year, and at least that many predicted for this year, the financial situation for working class folks looks bad and is going to get worse. The near total defeat of the American working class, combined with the cooptation of easy credit as a substitute for decades of falling wages, has left us with little to count on in times of crisis.

Layoffs mount and the capitalists continue to press their assault on what few hard-earned gains we still maintain in this harsh climate. Obama, hoping to pay for a trillion dollar deficit, has hinted at arranging a new deal with regard to social programs that often serve as a last bulwark between the American people and destitution.

The great movements of recent history are dead. The migrant movement has petered out in defeat, returned home or slipped away to less contentious locales. A victim of reaction, the collapse of the economy and it's own conservative leadership, the movement for all intents and purposes appears dead, at least for now. Leftists vultures feed on its corpse, but the chances of a reanimation seem slim, especially if the Democrats push through some kind of reform package this year. The emergence of a militant base never materialized. Unable to offer protection from the assault of state agencies seeking to placate the white working and middle class, the movement therefore became irrelevant to its own constituency. Will the tanking economy revive it? We will see.

The anti-war movement, too, has settled into the grave of its own digging, having proved itself the testing ground for Obama-mania. Settling into routine and the worst leftist habits of electoralism and symbolic protest, the movement happily shuffled along behind the Soros billions into the open arms of Democratic front groups and even more dispicable commie sects. Willingly stringing itself up under the approving gaze of the other war party, it's suicide wouldn't be so tragic if its potential hadn't been so great and the atrocities it could never stop so terrible. But, if the anti-war movement hadn't offed itself, Obama would have been forced to kill it. Either way, its stench no longer offends us. Will the escalations of the Obama regime breathe new life into it? We will see.

Lacking a strong, militant working class movement to challenge him, and as the beneficiary of fawning admiration in the corporate and alternative press, Obama has a free hand in pressing the final assault on what remains of America's always anemic welfare state. Capping thirty years of attacks on the American work force, started under Carter and his Fed chairman Paul Volcker, many of the old Democratic enemies of the working class are now back in business with the Obama administration to finish what they started.

Hardly a peep is heard in opposition. As Yahoo News reports today, we can even count out the comic lashings of the political cartoonists.
Bush's emotive facial expressions, easy-to-caricature physical features and, most of, all his deeply unpopular political decisions were fodder for liberal-leaning cartoonists. But the cool and detached Obama enters the White House at a time of considerable economic anxiety, bolstered by wishes of goodwill even from some political opponents.

"I had all my villains in place for eight years and they've been taken away," lamented Pulitzer Prize winner Pat Oliphant, one of the most widely syndicated cartoonists. "I don't know that I've ever had this experience before, of a president I maybe like. This is an antagonistic art. We're supposed to concentrate on finding things wrong. There's no point in drawing a cartoon that's favorable."
With no opposition, it's hard to see how the hope that so many leftists pin on him will be fulfilled. The Obama brand has surfed the spectacle in a way never before seen in this country, preventing many people from approaching his policies critically, even as he turns ever more towards the right, repudiating what few progressive positions he maintained until now.

Leftists spent the last campaign voting against a president who wasn't running for re-election, and hoped that by hitching their train to the Great Obama they would finally breathe the fresh air of a post-Bush era, which they expected to be handed to them just because they had believed in it so damn much. Instead, they will be turned into their own willing executioners, as they join his civilian corps, marshalling behind one reactionary policy after another.

It's easy for many to forget that the New Deal wasn't a gift from a benevolent capitalist class, any more than it was bestowed out of the fear of a collapsing financial establishment. As we are reminded by the London Telegraph, the romanticised view many take of the period of the Great Depression obscures the reality of the political situation of that time.
Roosevelt took over a country where the economic machinery had completely broken down. The New York Stock Exchange and the Chicago Board of Trade had closed. Thirty-two states had shut their banks. Texas had restricted withdrawals to $10 a day.

Few states could borrow on the bond markets. Illinois and much of the South had stopped paying teachers. Schools closed for months. An army of 25,000 famished war veterans squatting in view of Congress had been charged by troopers of the 3rd US cavalry with naked sabres – led by a Major George Patton.

Armed farmers threatening revolution had laid siege to a string or Prairie cities. A mob had stormed the Nebraska Capitol. Minnesota's governor was recruiting Communists only for the state militia. Lawyers attempting to enforce foreclosures were shot. More than 100,000 New Yorkers applied to go to the Soviet Union when Moscow advertised for 6,000 skilled workers.
Of course, we haven't seen anything like that here in the US yet, although the recent occupation of the Republic Window factory and the short-lived uprising in the Bay certainly give pause to any from the elite who think they have things on lock. Will we see more explosions like these, perhaps more furious and more determined, in the months to come?

The capitalist class certainly isn't interested in taking any chances. The deployment of the army for domestic use, the rapid expansion of the electronic police state and the spread of secret detention centers across the country are all indicators of the lessons that they have taken from history, and they surely shudder in fear at the riots in Greece and Iceland. They wonder, 'Is that our future, too?"

We are here to answer them.

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