financial crisis
30 Sep 2008
Black Monday
The rejection of the US$700 billion bailout overnight was a win for democracy but a disaster for free-market capitalism, writes Ben Eltham
In another fateful day in what have become dramatic times, the US Congress rejected the Paulson bail-out plan. Republicans joined with Democrats to vote down the bill 228-205.Global financial markets took it badly. More banks failed in America, Belgium and even in Iceland. The Australian stock market was trading 7 per cent down in futures before trading, and when markets opened at 10am immediately plunged hundreds of points. As I write, they were rallying briefly, indicating they will finish somewhere shy of the 8 and 9 per cent drops experienced by the S&P 500 and Nasdaq indices.
Writing in The Guardian over the weekend, respected commentator and author Will Hutton wrote "I've watched the economy for 30 years. Now I'm truly scared." Hutton points out the credit crunch has been unlike traditional bank runs in the sense that it wasn't small deposit holders who were pulling out their funds - though that too is happening. "Rather," he writes, "it was an escalating and terrifying run on the banks in effect by themselves."
And it's not over yet. Overnight Citibank took over the 6th-largest bank in the US, the troubled Wachovia, in a deal which will give the US Federal Deposit Insurance Corporation - the federal bank insurer - a US$12 billion stake in Citi.
In Germany, the shares of massive financial conglomerate Hypo Real Estate dropped more than 70 per cent after it announced it secured a new 35 billion euro line of credit from a consortium of local lenders.
In Europe, two big banks have got into trouble. The Netherlands, Belgium and Luxembourg have injected 11.2 billion euros to keep huge Belgian bank Fortis afloat, which has implications for Australia as the Belgian bank had significant operations in this country.
In the UK, troubled savings bank Bradfield and Bingley was nationalised ] and in Iceland the Icelandic Government took over that country's third biggest bank, Glitnir.
Stocks in another big Belgian bank, Dexia, dropped nearly 30 per cent after reports it was seeking an emergency capital raising and there were big falls in other financial stocks across he continent.
What caused it? A devastating one-two combination of the spread of the contagion to the European banking sector plus the voting down of the Paulson bill in the US House of Representatives. Despite the urgings of the Democratic House and Senate leaders, many Democrat representatives voted against the bill, as well as a majority of Republicans.
Wall Street then panicked as traders and investors realised that maybe the US public didn't particularly like the idea of bailing out massive bank losses.
In a very real sense, the defeat of the US$700 billion bail-out is a win for democracy. The plan was deeply unpopular with voters and ordinary citizens, who could not understand why taxpayer money should be extended to the very institutions that have caused the current crisis through lax lending standards. It's also, as Slate's Dan Gross points out, a stunningly hypocritical decision by House Republicans who approved countless spending bills for two wars. The combination of a weak leader and a dysfunctional Republican party has resulted in a situation where, to quote Paul Krugman, the US has become "a banana republic with nukes".
The real culprit - apart from that shadow of a man, President George W. Bush - is US Treasurer Henry Paulson, himself a mega-rich former investment banker. Paulson's hastily concocted proposal was a remarkable exercise in panic and naivety: panic at the sea of red ink engulfing Wall Street, and politically naive in the extreme. The original plan, a flimsy two-and-a-half pages long, was broad, vague, and arguably unconstitutional. Despite a week of wrangling on Washington's Capitol Hill that introduced many new provisions, including significant oversight clauses, many US lawmakers could clearly not bring themselves to vote for it.
Paulson's position now looks untenable. But with President George W. Bush's administration only weeks away from lame duck status, there is little chance he will resign. It hasn't been a good week for Senator John McCain either.
What now? Paulson says he will go back to Congress to try and get an amended bill passed. With events moving this quickly, it's almost impossible to predict what will happen. One thing seems almost certain: the US and Europe are headed for a sustained economic contraction. A depression? No. But a recession? Ireland, Spain, the US and the UK may already be in one. If these prove severe, Asia, which exports much of the world's industrial output to these economies, will suffer accordingly. Australia, which exports much of the world's raw materials to Asia, will then feel the pain too.
The only good news for Wayne Swan is that, through the good luck and occasional good judgment of his predecessor, Australia has the most benign macro-economic conditions in the western world. Our banking system is sound: as Alan Kohler points out, Australia has four of the 18 remaining AAA-rated banks left in the world. And with interest rates above 7 per cent and basically no Government debt, Australia has the ammunition to spend our way out of almost any downturn.
We may need it.
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Ben Eltham, I hope you’re correct.
How do we spend our way out of this downturn? The country has enormous foreign debt a long term current account deficit and is dependent on foreign trade, where is the room to manoeuver if the resources boom collapses.
Maybe a serious world recession will be a blessing in disguise. With consumer demand declining and jobs disappearing everywhere, it might be just the time for governments to find the political courage to tell the coal industry to go jump, and to adopt a bold Keynesian solution - i.e., massive public spending on solar and wind power stations and their associated new transmission and transport infrastructures. We may thereby be able to sharply reduce our carbon emissions and to reinvigorate demand-flagging economies in one hit.
Or does anyone have a better idea?
"they are four of only 18 AA-rated banks in the world "
is what it says in the crikey piece you link to - not AAA-rated, as you say.
You might be right, but that’s not what it says. And Business Spectator on 29 July 2008 says S&Ps rate the four Australian big banks AA with assorted endings, but basically stable.
Of course, that was 2 months ago.
Jane E - thanks for picking up that point. It should have been AA. Of course, as we have observed before, ratings agencies don’t always get it right - for example with Residential Mortgage Backed Securities.
Rocky - the Australian economy is not in downturn yet. Far from it. We’re still growing robustly. Australian corporate and consumer debt is indeed significant, but our government has next to no debt and a budget in surplus.
Growing robustly Ben? Prior to today’s declines the S&P 200 Index had plunged 11 percent in September, Super Funds down on average 6 precent and 12 percent last year, property funds down 18 percent on average.
That was BEFORE today’s carnage!.
More than $100 billion dollars worth of Super disappeared BEFORE today’s wipe outs. Get your head around that figure Ben, A$100 Billion! Dammit there are only 20 million of us, how much can we actually afford to lose before somebody raises the alarm?
The RBA has already pumped more than $12 Billion into our banking system last week alone! The Australian dollar gold price struck a record high of $A 1131 per ounce on September 18.
Don’t worry ladies and gentlemen, hold on to your hats and coats, because we are growing ROBUSTLY by printing $600 per capita of "new" paper per week! That is the rate at which the value of your wages is being debased by those bastards at the RBA and Canberra. They are literalloy printing their way into prosperity - money really does grow on trees in Canberra.
Our international trade balance is back in deficit ($A 717 million in July according to bureau of statistics) with exports falling 1 percent and imports jumping 4 percent. Coal in particular plumetted 9 percent (probably Australia’s biggest export commodity).
The Aussie dollar is back in the tank together with our terms of trade and we are going to stimulate our economy with a carbon tax! Great!
Electricity prices are set to rocket by as much as 40 percent in real terms BUT, and get this, according to the architect of the mad carbon scheme, we could lose 8% of our GDP and expected average EARNINGS of ordinary Australians will drop by 12 %!
Politicians and bankers are NOT ordinary Australians so I guess it really does not matter if struggling Australian families get kicked in the teeth again - right? After all we are all stupid enough to actually TRUST our politicians and our economists!
Consumer confidence report is at it’s record lowest point in it’s history.
The Baltic Dry Index has fallen to lows not seen in years - and this index is a proxy for ALL Australian resource exports.
And yet the public is being told, "…don’t worry, its all rosy, nothing at all to worry yourselves about, we are growing ROBUSTLY!!"? - huh?
You have got to be joking - please tell us you were joking Ben!
George
Don’t Panic everybody.
We’re fine. We just have to keep digging up W.A and shipping it over to China and India.
If that is’nt enough, we can drill for oil in the N.T.
The traditional owners will become the new custodians of the shiekdoms and fiefdoms of these oil fields.
We’re all in debt over our heads already and the RBA might lower the interest rate by 0.5%. I doubt the rapacious banks will pass it all on, not straight away anyway.
So to follow the silent peeing in the swimming ool analogy.
We now find ourselves trying to swim ashore from a shipwreck with no land in sight. The sea is awash with oil and we are saddled with weight belts of gold, lovely.
As well as padddling as fast as we possibly can to stay afloat in the oil-water mix, we have wonderful advice from ashore to not pea in the ocean please don’t pollute the environment, and as these advisers light their cigars and throw their lighted matches away igniting and lighting our flaming way back.
Don’t worry about the pollution from the oil fires either, we can breathe in the fumes and not exhale, that should keep the C credit entrepreneurs happy.
Hopefully the upshot from all this will be a nationalised commonwealth bank, because this bank is seriously in danger of losing its way with regard to customer service after being privatized by Howard in the late nineties.
Whilst I agree with Ben that the Australian Banks are looking ok I would query how the average Australian is looking. The average debt to income ratio for Australians in the seventies was around 25%. Today it is closer to 165%.
This means that if I earnt 100,000 per year back then you could expect my debt to be around $25,000. Today if I earn the same amount my debt would be closer to $165,000. Such high levels of debt are dangerous in any body’s books and rises in Interest rates are far more dangerous today than they were 20 or more years ok. With a low debt to income ratio people could survive insane Interest rates of around 20%. Today 10% would be catastrophic for many people.
Secondly the cost of housing has risen similarly. A house once cost roughly three to four times the average persons annual income. Today it is closer to seven or eight - which is amongst the highest in the world. This of course is a boon for banks as they have the average Australian by the short and curlies. People have become married to debt under the assumption that the value of property will continue to out pace the rate of inflation.
Note that the above has nothing to do with the current sub prime crisis. The sub prime crisis could trigger however a loss of confidence in the Australian property market which could result in anywhere from a 15 to 40% drop in real property values over the next 10 years or so. This would be catastrophic for the average Australian home owner who has largely wrapped up their financial lives around property. Of course they have also invested heavily in superannuation as well and that is already seeing vast losses as mentioned by Rockjaw.
Garnaut however actually paints a way forward which I think the government needs to seriously look at as a solution for Australia. If we focus on developing new industries which are environmentally sustainable we will quickly become the first point of call for countries as they jump on to the Kyoto bandwagon. Perhaps now is the time to push new industries just as we did during the great depression.
Guess who the voters will blame for the disaster,the politicians in power at the time, not Howard and Costello for 11 years of unsustainable debt and phoney "prosperity."
revilo: "Hopefully the upshot from all this will be a nationalised commonwealth bank, because this bank is seriously in danger of losing its way with regard to customer service after being privatized by Howard in the late nineties."
Fact check: the privatisation of the Commonwealth Bank began in 1991 and was completed in July 1996. The Howard government was elected in March 1996. So, the privatisation process was initiated by the keating government, and it’s a bit of stretch to call July 1996, "the late nineties".
cnorman, this is a left oriented web blog. Nobody appreciates people like you pointing out that Australians require $1.65 to produce $1.00 worth of goods. Socialists believe that it is a GOOD thing to produce far less than it costs to sustain you.
Left thinking economists believe that free market systems are undesireable because under free market systems it is impossible to tender a rump steak and expect a nice fresh hind quarter in return.
Similarly, your observation about Australia’s 165% debt to GDP ratio is an unwelcome observation to left thinkers because it is apparently our right to consume 165% of that which we produce. It is socially unacceptable that we should point out that there might be something wrong with the simple maths in that equation.
As socialists we accept that facts are the consequence of consensus, not logic, and if the consensus is that you can earn a dollar and spend $1.65, well then please don’t question that fact nor should you ask where we will all end up if we continue living beyond our means. It is counterproductive and upsets the nice orderly "consensus" - it is "anti-social".
If you want to use simple logic and facts when you present an argument, then would you please go find another website to do it on where these basic and simple concepts are better understood?
DDT Chumley
Well I hope continuing to dig up WA and selling it to China works. If China’s economy depends on exporting to the Walmarts of the USA something will have to give.
Perhaps the Chinese themselves are a big enough market.
I say let capitalism fail. there are other better ways to run society.
Capitalism and socialism are two sides of the same tarnished coin.
One side is lacking in the proper protections for the little people with small savings and investments and the other too restrictive of business.
The unregulated, unrestrained capitalist free market has proven to have deep flaws however, mainly associated with misinformed, speculative and over-confident marketeers who have a far too narrow (and greedy) an approach to finance and economics.
They have failed to factor in a changing energy market with rising costs and have panicked at the approach of the retirement of millions of baby boomers.
However, this time the little people are determined that the big people who created this current environment are going to be the ones who suffer the losses.
This is why I and many others hope the next bailout Bill at Congress also fails to pass.
Because now (for once) its the big boys from the top end of town who are running scared and who have everything to lose.
Governments should only intervene in the financial sector to underwrite or protect personal savings, mortgage investments and superannuation schemes.
And the RBA should be using interest rates to help regulate economic activity and to keep a lid on inflation.
All other high risk investments should be treated as they were always intended to be - risky and therefore liable to be lost.
And even if entire large corporations go under, governments should only bail out those little people who have not entered into high risk investments for higher returns.
That includes little people buying big houses (without substantial deposits) beyond their means.
"The plan was deeply unpopular with voters and ordinary citizens, who could not understand why taxpayer money should be extended to the very institutions that have caused the current crisis through lax lending standards."
I would suggest that the plan was deeply unpopular because a large number of Americans *could* understand that the taxpayer should not be responsible for extending money to the institutions which caused the current crisis. Whatsmore, I would suggest they knew this to be wrong, because, according to many (sensible) economic projections, such a bail out wouldn’t make a difference to the economic state of things anyway, apart from a slight recapitalisation of these institutions which might just give them time to clean up a little more and then go home.
The BBC (here in the UK) is running the exact same line; Paulson is right, everyone else is wrong. It is inconceivable to this establishment organisation that the flawed economic system in American should not be propped by taxpayer money.
Rockjaw, while I appreciate your understanding of matters financial, I don’t understand your assertion that ‘left-thinking’ people support the burden of ‘free-market’ capitalism’s losses being ‘socialised’, or that socialists support the notion of overspending. While I don’t call myself a socialist, I would hazard a guess I am closer to that definition than you, but I certainly don’t see any kind of solution in spending beyond means.
In fact, capitalism is the beast which drives the cost of things higher than their real value, so that, under it, labour is always several notches below assets (like a place to live) in value. In a socialist ideal (and we can talk ideals as freely with socialism as with capitalism, since we’ve firmly established that capitalism (that exists) exists on the back of socialist methodology (like collection of taxes for the ‘greater good’), labour and essential ‘assets’ would be on a more equivalent platform, as they should be (ie, food, shelter, water etc should all be easily achievable for anyone who works).
I’ve tried to follow your threads on this debate for the last few weeks, and it seems you jump from [sensible] criticisms of Ben’s articles to irrational moaning of an ‘us’ and ‘them’ nature, which groups ‘left’ as people you don’t agree with and ‘right’ as people you do.
Can you please (I acknowledge the possibility you may have done this already elsewhere) explain for me why you think this is an issue of socialism v capitalism, and why ‘lefties’ have flawed thinking on the subject, and what exactly that flawed thinking is? (I might even agree, its just that right now its hard to see through the general annoyance and sarcasm).
cheers,
Derek
Ben, so ! Australia has the ammunition to spend our way out of almost any downturn. Why not go further and make some government services perform on a competitive basic by engaging meaninful competition reforms to further strenghten the economy?
Dereklane "…I don’t understand your assertion that ‘left-thinking’ people support the burden of ‘free-market’ capitalism’s losses being ‘socialised…"
I also do not understand that assertion Derek. Who made that assertion?
Ben: Has your, insightful I’m sure, article been blacked out in sympathy for the Black Monday (at least this is what it looks as if it may read) you discuss. Or is there something wrong with the transmission. Or, perhaps, my computer isn’t working, or could it have something to do with the fact I have received no transmissions at all from NM this week. I’ve sent an email to the Contact Us dept. Then I arrived at your article only to find it had been tastefully blacked out. Very mysterious.
Cheers
Venise
PS: It can’t have been anything I’ve written, as as far as I can remember I haven’t written anything this week.
Hi Rockjaw,
I said:
"I don’t understand your assertion that ‘left-thinking’ people support the burden of ‘free-market’ capitalism’s losses being ‘socialised"
in response to:
"Socialists believe that it is a GOOD thing to produce far less than it costs to sustain you."
"As socialists we accept that facts are the consequence of consensus, not logic, and if the consensus is that you can earn a dollar and spend $1.65, well then please don’t question that fact"
The logical assumption from your remarks is that left economists accept the ‘free market’s’ production of massive debt, since that is where the capacity to spend greater than our earning has come (both in the provision of loans/mortgages at percentage rates which put our earnings far below our expenditure, even over the course of our entire lifetime, and the manufacture of profit on the market in debt margins rather than with real capital), because according to you, they don’t like you to talk about why we earn less than we spend. That implies guilt, and therefore culpability. (Is my logic flawed in this?)
As I said, I may be wrong, but as I understood socialism, it’s not about spending beyond means, but about making sure that everyone has the necessities and noone has excessive amounts (we have only one stomach, as the Dalai Lama said). Its more about equal distribution of available resources. Debt greater than income is a decidedly feudal position (which was superceded by capitalism in my interpretation), as was the current oligarchic western governmental model, which also sits nicely with capitalism, since the same interests are satisfied.
Regarding a [roughly] socialist model; Venezuela, for example, looked at debt (particularly US debt) and has been busy eliminating it for the past 10 years, whilst at the same time implementing social programmes around the country, presumably with the money saved from not needing to pay interest on that debt, and, of course, revenue from national resources (imagine the services/infrastructure that might be available to the average Australian if the same were done there - one of my biggest contentions with Oz politics is the willingness of the public to accept this limbo of neither socialist nor true capitalist. You pay taxes and you get very little, comparatively, for them. The elections are often fought on tax cuts rather than serious social programmes that might make a difference to the quality of life of any particular citizen).
Aside from the obvious lie that capitalism can exist without a framework of socialism in place (the collection of taxes ostensibly for the greater good of all) - it cannot, because, for one reason, the socialist framework is responsible for keeping order in dissatisfied ‘proles’, how is it that you put the socialist position as burying its head in the sand in relation to our collective national debts? I would think that most dedicated socialists would at this point be saying ‘see? that’s what happens with an unrestrained, unregulated ‘free’ market system.’
As I said, if I’m off the mark, please indulge me with an explanation of where it is you are actually coming from. I often agree with your summary of things economic (I get the impression its your job), but I have difficulties with the polemic nature of your views on ‘left’ (wrong) and ‘right (right), mainly because it appears you’re attributing what is essentially your perception of poor thinking to those you perhaps don’t like, rather than examining the thinking of different economists, establishing their political position (not simply their political allegiance), and then drawing conclusions.
Maybe, for example, you are equating ‘left’ with ‘Labor’ - obviously a mistake, or perhaps a joke. I honestly don’t know. Anyway, I look forward to a response, if you have the time.
cheers,
Derek
Derek - "…The logical assumption from your remarks is that left economists accept the ‘free market’s’ production of massive debt, since that is where the capacity to spend greater than our earning has come…"
No, Derek, your assumption is neither logical nor accurate.
"Debt" does not originate from "free markets" as you mistakenly believe. Debt in this case originates from the Central Banking systems such as the one which has caused the current global credit crisis, which is the US Federal Reserve, which was established by good left wing socialist stock like W Wilson and F D Roosevelt and which was VEHEMENTLY opposed by supporters of free markets.
There is nothing "free" about that Central Banking system at all. Typical of socialist systems it is in fact centrally controlled.
Now I know this will come as a shock to you Derek, but if you had looked up the word "free" you would in fact have found that the words "Centrally Controlled" mean something entirely diffrerent. "Centrally Controlled" means the opposite of "free" and is more closely associated with "socialism" than with "free markets".
Now look up "The Central Banking System", master a working comprehension of the socialist characteristics of the US Federal Reserve and then you might be brought to better understand why the US workers and taxpayers from the ACTUAL "US free market" (which is "Main Street" and not "Wall Street"), are so downright fed up with their Government for forcing what little is left of their free market to once again come to the rescue of yet another of their government’s failed experiments with socialist systems.
The remainder of your post takes the discussion even further off topic and I think it is best that you wait until you have mastered the basic differences between "free market systems" and "socialist systems" before you attempt the complexities of the "Dalai Lama" and "Venezuela".
douglas jones
Tony Kevin agreed.
Most commentators seek cause or escape, assuming presumably there is an economic method acceptable to those who matter.
You see opportunity to take action against an apparently still unperceived threat which if science is correct is going to leave our current money meltdown looking like a small blot in a devastated world.
I am sure a bust will hurt us all and equally sure those who matter will see that those supporting them do not suffer as much as others. See George Monobiot recent piece Z Net and Manchester Guardian on money given to the big end, the end that deceitfully and wilfully got us this mess including politicians.
The mantra of Government out, will not wear obviously regulation to control the wilful enthusiasm is needed. The hidden hand is probably not there at all as Stiglitz notes (Peddling Prosperity) though he advocates globalisation modified (making Globalisation Work), the big end will be pleased to note.
But returning to the threat we face.
The big one of 1929 on was solved by war and by the government action war necessitated.
Economic activity will be slowed, a reduction of pollution allowing added time for research and implementation of methods to combat climate change, as Kevin points out.
We have time before our cheap form of energy oil runs out. Currently used to make machinery work machinery presumably needed for the infrastructure associated with any solution.
Many jobs will be created perhaps not as many as war.
Business will have a directed and funded purpose, polis will be able to behave as normal.
Many will be hurt, the lesser folk, who will be useful to those who must praise the sacrifice, but many will be hurt anyway.
If we are not too busy that is those who have time and inclination to think about the questions why did the period 45-73 have such high GDP and why excepting a year or two has the market performed so badly 80-2008? In the year or two when GDP matched the earlier set, it seems GDP was related not to the market but to increased debt.
Was it because their was a huge consumer demand following wars destruction, similar demand will be there to defeat warming when the media spins the story.
Was it for some other reason certainly the reason has not been demonstrated by the market economy.
Finally do we have a speedy economy for competition providing the pareto solution or because we must have work for people.
If the latter have we too many folk and equally does excess consumption of needless goods make us any happier?
The imponderable what is the purpose of living I leave to others, but presumably iot can’t be profit. See Harry Shutt The Trouble with Capitalism 98
douglas jones: "have we too many folk"?
Huh? This country, and many others, has so many areas of empty, fertile-enough land, while production does well to feed and clothe when undisturbed by bursting bubbles of funny money. Things sure get creepy when the chat starts turning "green". As migration catch-ups prove, we have too few folk because of the unbalanced grey population brought on since the early ’60s and the pill.
Stern, Garnaut and their ilk sitting atop the endorsed "climate science". Stern and Garnaut are World Bank men. Now WB and its more recent ideologies have been key to the sort of monetarist market plunder that this crash represents as a logical consequence. Those guys want debt to be carved in marble as if it were some sacred bond - like their positions, titles, property deeds, family trees, networks, etc.
Funny again to read the left-right, cap-soc bicker. That mentality is as "unsustainable" as the monetarist dogma swallowed whole by our politicians. Now I shouldn’t single anyone out (though rockjaw knows my boredom with his Joh Bjelke-style "socialist" stuff). But consider the odd situation around dereklane’s mention of the Dalai Lama: "we have only one stomach".
The Dalai Lama was selected in a feudal system to head a brutal theocracy that kidnapped boys to sustain itself. The Dalai himself was mentored by two SS men, one of whom was a field leader of the infamous Einsatzgruppen extermination squads in eastern Europe.
By the way, Woodrow Wilson proved his excellent "free market" credentials when he gave his in-principle, then unqualified, backing to the "war guilt" and reparations processes that sacked Germany in the lead-up to Weimar of 1923. Interesting to see rockjaw’s figures revealing the very similar paper-printing idiocy going on from those financiers’ subordinates heading western governments now.
Hi Mil-Observer,
I wasn’t offering up the dalai lama’s words to model that system of government, but because it’s a fairly obvious but important maxim in all this madness. I hope you can appreciate that. Even Goebbals had wise words to contribute to the collective political knowledge, but that doesn’t mean that I advocate nazism.
Rockjaw, it’s clear that your contempt extends anywhere people don’t willingly accept your viewpoint completely. Here in the UK (particularly on medialens website), conflict of opinion is generally more courteous amongst generally like-minded people. I wonder why it is we need to bolster our opinions with so much machismo in Australia?
The credit/debt bubble (the latest) started from Thatcher’s and Reagan’s neoliberal market deregulations. You might point to a US democrat source for ‘debt’, but calling any US president ‘socialist’ is about as useful a definitive to the meaning of socialism as pointing to the current political system in the US and maintaining that it is the definition of capitalism. Neither work, and are at best simplistic. At worst, disingenuous, to prove a prejudice and nothing more.
Perhaps you could explain anyway (for the sake of your argument, not mine) how Wilson’s actions correlate to the following graph?
http://bp3.blogger.com/_rWY3qGfe6gc/SI1dtCRoXGI/AAAAAAAAA5o/FCp7-0EiyKI/…
Strangely, it seems more likely to correlate to a predominantly ‘right’ period of US, UK history.
cheers,
Derek
Congratulations mil-observer: You have written one of the most idiotic rants I have ever had the misfortune to read. (Perhaps you should call yourself Nil-observer) Australia has one of the most fragile eco-systems on earth and can ill afford to be raped by the huge population explosion that is happening now. Even John Brumby (premier of VIC) admitted that Melbourne had too many people.
Apparently all of our ills are caused by the oldies and by allowing contraception. Whoa, nothing like the witless ravenings of a Catholic to fuck up a conversation about the economy. As to how the Dalai Lama comes into a discussion about the failure of the financial system, escapes me.
It seems to me that most of the commenteriat are indulging in facile semantics.To be arguing about free market capitalism versus a socialist ideal is like arguing whether the horse that bolted from his stall was a bay or a buckskin. Useless when the horse has disappeared.
The inevitable scenario on the bourse was just that, inevitable. A dive into a Depression acts purely as balance tpo the runaway boom. In this particular case it was principally brought about by the greed, and unregulated frenzy of the American market speculators. Speculators who have no thought of what happens to the mortgage market and the people who have to suffer because of the speculators who have no scruples about behaving like savages.
Half of the current crash is brought about by all the negative news in the printed and visual media. The more these idiots rant on with their muddle-headed doom and gloom merchants, the greater the despair of the people. One thing that has to be faced. Whether Free Market Capitalism, or Socialist Nirvana Idealism, the market is fucked. It is extremely doubtful whether the bill which is about to be ruled on by the American Congress will achieve anything, not because of it’s socialist intentions-if you are a John McCain fan, or a fit of idealist well meaning, if you are arguing for the Capitalist Scenario. There is one FUNDAMENTAL fact about share markets-All of them- are like water, they have to find their own level. To perceive otherwise is a perception of fools.
It’s time people grew up. Sure, the socialist concept is the correct concept, however, no one has succeeded in applying it to the financial system.
The Dalai Lama reference was to counter dereklane’s mention of him, thereby illustrating how vacuous the usual left/right binary is in much discussion nowadays. Obviously that part of the chat was a couple of months ahead of venise albrechtsen.
But how’s this for a plug? "Even John Brumby (premier of VIC) admitted that Melbourne had too many people".
Like, let’s just conveniently blame the people screwed over for the fact that the state has no cogent infrastructure program except for the PPP looting operations (kind of ongoing bail-outs at lower levels). Maybe Venise went to the same school as that slimy ponce too.
and this:
"Half of the current crash is brought about by all the negative news in the printed and visual media."
Yeah, right! That’d be like Jim Cramer on Bear Stearns "You don’t say a thing. It doesn’t inspire confidence". In other words, let the massive confidence trick just keep rolling people into a crash they’re not even allowed to talk about! It’s a good laugh - see http://www.videosift.com/video/Jim-Cramer-Blows-a-Head-Gasket.
Notice too how none of the toadying media pundits and their minders is daring to breathe the ‘B’ word: BANKRUPTCY.
Mil-observer: You do have a talent for assumption. However, are you referring to Janet Albrechtsen,when you call me by name? (I’m not sure, as I don’t get the Oz) but isn’t she a hard right-wing scribe with the Oz? If so, know that I despise radical right-wing thinking. She, Peter Faris and Andrew Bolt are the polar opposites of my political thinking. Although why I should have to explain this I don’t know.
I know of no real connection between the VIC government’s appalling record as far as infrastructure is concerned: with the legions of people which have poured into this state. Isn’t it about time the people of the outer suburbs got out of their MacMansions entertainment rooms and started getting a political awareness?
Who on earth are Jim Cramer, and Bear(?) Stevens, oops Stearns? I have never heard of them. Of course the media help to set a scenario, if you can’t work it out you are less than intelligent.
I have to say that your economic knowledge is on a par with your Catholic thinking. Dead hopeless.
Several of your own assumptions are inherently offensive; your blanket labelling and abuse are self-evidently so, but I dissect the rest of your fetid carcass here. You seem to write such offensiveness with some haughtiness and comfort, as apparent in your repeated condescension via unsubstantiated and oblique assessment of others’ commentary.
1. “The inevitable scenario on the bourse”. How inevitable? Are neoliberalist monetary policy and debt markets phenomena of nature? Or can such madness be “inevitable” only if pigeon-holed into some simplistic monetarist dogma uttered by a market speculator such as Friedrich Engels, or the rabid neolib abacus-brains of a Rand or Thatcher? If so, then your view is no “polar opposite” of your cited celebrity “right-wing” talking heads at all, but potentially very compatible in practice. By your belief, such a massive crash scenario would have arisen anyway under an economic regime with a properly regulated and accountable banking system!
2. “Catholic thinking” (as a pejorative), thereby ignoring those many with other ideological perspectives – including political thought, other religions, and atheists - who also do not place reflexive blame on the mass of humanity for problems caused by irresponsible, dishonest, lazy and greedy elements in the establishment elite.
3. Tribalist snobbery based on postcode (“people in the outer suburbs [in] their McMansions”). I know several outer-suburban people who have acute political awareness and nous, and who do not live in “McMansions”. Some of the students I know from such areas have to make three separate journeys on public transport just to get to work and uni. On Melbourne’s east side these past two decades, the only relevant infrastructure project of any note is the Eastlink tollway, itself at least ten years late! You seem to regard such affected people’s predicament with sneering contempt, if not delight.
4. So: “no real connection between the VIC government’s appalling record as far as infrastructure is concerned: with the legions of people which have poured into this state”? The connection is a very routine one called “town planning”, a science with many centuries of history extending to Roman and Chinese precedent, for example. That state and federal apparatchiks could ignore such simple, predictable demographic imperatives proves their base irresponsibility; that they could then shift the blame to the “number of people” proves both their dishonesty and their misanthropist degeneracy. Of course, I would retract the charge of dishonesty if such people showed some consistency by effecting their own immediate self-destruction as a demonstration of “leadership by example”, however misguided and hopeless.
5. Irrational anti-American sentiment (as another avowedly “leftist” badge). Your statement says it all: “It is only in America that such dealing in derivatives, and shorting, and total gut-wrenching greed can exist”. Why then have such activity and sentiment been so apparent here, and in London, Montreal, Brussels, Helsinki, Singapore, etc.? Do you realize the absurdity of your statement?
So how are you actually a “leftist” at all? Your ideology – if your faith really deserves that lofty noun - seems more a grab-bag of “fashion statements”, misanthropy, and characteristically middle class prejudice. By “fashion statements” I refer to your gratuitous Yank-bash and your pre-occupation with a caricatured - and ultimately unsustainable - “left/right” binary which you yourself claim to oppose, but actually sustain by your reference to some equally irrelevant talking-head media blowhards.
By the way, if you genuinely do miss the meaning and significance of the “Bear Stearns” investment bank in this context, then you should really avoid this forum and related discussions about the crash. Stick to disparagement of people from the outer-suburbs, and advocacy for eco-friendly World Bank bosses; just do it somewhere else, like the pages of a newspaper color supplement "leisure" section, or our increasingly corrupt and irrelevant parliaments, for example.
The "bailout" is through, complete with the cheap trinkets it cost Goldman Sachs to buy Congress and gain comple and autocratic control of the world’s biggest markets.
Hats off to the Democrats! Cheers! Great work guys, now let’s see how hard American workers can go before they all drop dead with exhaustion.
Make no mistake, now the blood is going to run knee deep in the financial markets as manipulation becomes the new "invisible hand" which will paint new price curves to better channel money, wealth and capital from the hands of the world’s brainwashed labourers, economists and statists into the hands of the Global Banking elite.
But there is a twist to the tail! The Federal Reserve’s most famous Chairman, Mr Alan Greenspan, writes in his article "Gold and economic Freedom" - "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation," he adds. "There is no safe store of value for the dollar".
He says "This is the shabby secret of the welfare statists’ tirades against gold," he says. "Deficit [government] spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
So as a Central Banker Greenspan was shit scared of gold because it was the "anti-dollar", the only protection against the sort of crisis the world faces today.
Not only that, but like Greenspan said of the laws of economics, they cannot be deceived forever! That is what this credit crisis is trying to tell us.
Before the US Senate Committee Greenspan was asked by committee chairman, Senator Paul Sarbanes "do you recommend a return to the gold standard?" to which Greenspan responded "’I’ve been recommending that for years, there’s nothing new about that. It would probably mean there is only one vote in the Federal Open Market Committee for that, but it is mine.’" - so even the Fed Chairman knows, gold is the only way to prevent economic catastrophe caused by excessive credit.
This bill’s passage proves that the average socialist is really just nothing more than a closet capitalist.
Since Derek speaks of Brits - hey Derek, all the bright ones are already here in Australia mate, who cares how full of airs and graces the ones left behind still are, we have civilised ours down under - the Brits have begun to understand the nature of this crisis despite the best efforts of the world’s "economists" to convince us all that there is really nothing to concern ourselves about.
Check out this article, seems the British fixed income worker is finally coming to understand what Greenspan was talking about, that workers, the darlings of the socialists, are just the poor brainwashed suckers who have been tricked into pulling the cart while all the lefties sit back comfortably on board drinking champagne with their caviar and their Central Banker mates!
Here’s the link:- http://www.ft.com/cms/s/0/8de8c988-90d1-11dd-8abb-0000779fd18c.html?ncli…
There is still time for the rest of us to "get the picture", but not much.
So pop into your bank, draw all that paper trash they call the "dollar" from your accounts and exchange it for gold and silver before you really will need much more than mere welfare to survive.
The choice is either Canberra and the RBA or gold - duh!! How bright do you really have to be to figure that one out?
Rockjaw, I don’t know whether NM allows this sort of question, but how would you convert to gold?
I mean do you buy mining shares? Or do you mean jewellery and gold coins?
Are you implying that things will get so bad that people will be forced to barter for goods? What exactly does all your "buy gold" commentary mean?
I was fortunate enough to have a broker who told me to change my super last year, and then the markets tumbled just after I had sold. I was very lucky. Now I have a self managed super but most of it is in cash. What should I do now? I know I dare not put the money into a "professionally" managed super, not while those nitwits are losing money like they have been doing the past few years. I resisted their advice to invest with formal managers earlier this year and I have survived the carnage, so I have no intention of handing control of my super back to those idiots anytime soon.
What should I do?
I am not sure if we are even allowed to ask for or give opinions about investing here but I would apreciate your views. Thanks. Rogerio
More insincere pot-stirring mischief from the delighted rockjaw - who does he really work for?
Sir Alan Greenspan is a total twat - on record too as a another worshipper of that psychopath Ayn Rand. Anything else?
He was a uni drop out, but even his limited tertiary studies had barely any relationship to the positions to which he somehow ascended.
Rogerio, the Orwellians in Canberra will doubtless have some law in place which prevents the freedom of opinion on the markets to pass unhindered from one person to another so I will not make specific recommendations - but in response to your question you might consider listening to this broadcast from the indefatigable "Dr Doom" of the Doom Boom and Gloom report:-
http://www.cnbc.com/id/15840232?video=868863712&play=1
He was asked similar questions to the one you ask me.
George
Rockjaw,
Your comment more or less makes my point (regarding machismo of ‘debating’ style); you ignore my argument (that the current debt bubble began with two right wing political parties, with graph to show the trend, and that ‘left’ and ‘right’ are inappropriate terms - establishment and non/anti-establishment would be far more appropriate) in favour of cheap/childish pokes.
I would appreciate a sound discussion, where you provide your knowledge, and other’s theirs, and everyone goes away a little wiser. Instead it seems a point-driven game (where winning appears to be most effectively denigrating the opposition). It seems that many contributors appreciate the Australian political system as a model for debate.
Regarding the article you linked to, I doubt very much whether the ‘average’ Brit has come to understand that gold might be a more appropriate faith than paper (since the average Brit has *no* savings at all in which to invest), but it is very likely, even so, that the rush for gold has come by yet another media manipulation. In all free papers here last week, front page featured a story on a similiar phenomenom occuring in the US - with the gist being the necessity of buying gold. I suspect that the rich (with savings) are buying gold now simply because the idea has been put in their heads, without the greater awareness of the reasoning/history etc. It certainly can’t do harm.
But we’re not talking fixed income workers, at least not in the normal range - by my reckoning, only upper middle classes (and beyond) have any real savings in Britain right now. Most people have overwhelming debt (an issue I can, again, say is neither hidden by such as the Morning Star - the only socialist national paper - or its readers, or accepted as a good or right thing by the same). Even the mainstream lib dems are (on the face of it) enraged by the huge inflation in personal/national debt.
To reiterate my original point; while your points on economic issues are generally on the mark, your reasoning on who is responsible (socialists) seems not. You haven’t yet provided any particular reason for your assertions, which is a problem. If we’re willing to look as far back as Wilson (as I said, I don’t accept that as relevant, or Wilson as the epitome of socialism), we should at least we able to go back as far as Adam Smith also. Understanding the crisis needs also an understanding of its root, which is either in the 80s (as per the graph I posted) or as far back as the beginning of the industrial revolution, or or feudal law (and oligarchic control of the populus), because these things are relevant (and mirrored, in the case of economic expansion and oligarchic control) in the core issues causing the current economic issues (as is, of course, the US reengineering of wealth post WWII, which I think you mentioned, and which links back to the gold buy up).
But these are not left/right issues, unless, of course, you believe there is such a thing as left and right in Australian, US, UK politics. There is not (you can tell that in each case fairly simply by asking the poor how each new change of government affects them. Invariably, they will say ‘I’m still screwed’).
It would be useful to get past the attitude to discuss the actual problem.
cheers,
Derek
Derek,
I don’t have a clue what you are talking about so you will have to find somebody else to have your debate with.
Perhaps yourself and mil-observer could discuss those confusing graphs and equally confusing explanations you provide for those confusing graphs.
George
I rather fancy that Herr Übermensch knows that, despite his persistent efforts, there’s no confusion over here whatsoever. His distractions over "socialism" and "statism" are left like so much bright confetti to clutter the debate, so obviously meant to confuse at least some of us some of the time.
I argue that within the broader neolib regime, such mischief is a more activist expression of a general, deeper cultural phenomenon. The conditions we see here - and less explicit in more mainstream media - are a widespread degradation of political discourse; a corrupted media perpetuates "left/right" caricatures which dissipate, divide and neutralize popular opposition by the exploited. Again, I do not mean to exaggerate Soros in this context, but his is a good example of cynical neolib usurpation and trivialization of ostensibly leftist causes - funded and mobilized for quite different purposes. Another illustration is bankers’ vast sponsorship of environmentalism.