Tag Archives: economy

Something doesn’t add up.

I’ve just finished reading the latest installment the New York Times Reckoning series; This look at the current financial crisis has given rise to some queer intuitions on my part when held up against another brilliant article in The Chronicle about how the best historical example of the current crisis is not 1929, but rather 1873.

The latter article suggests a much more probable cause for the current mania; namely that a certain combination of economic forces and fear have given us our current situation.  The question in this situation is when the bottom of both fear and the rapid revaluation of our economy will occur.  The second question is who stands to profit most when this time comes.  The silly thing about the Times article just linked is that it question-begs.  It tries to inculcate the reader into thinking that things have bottomed out, and will only get better soon (read: “Buy stock, for gods sake!  We need your cash!”)

What then, to make of the panic of 1873?  The author of the article in the Chronicle claims that the crisis of 1873 preceded a westward-shift of power; he draws the hazy conclusion that power will continue to shift west, to China: this is an impossibility.  Enough has been made of China’s political and social problems, but their economy is predicated on exports to such an extent that a slowdown in the West will surely have negative repercussions in Beijing.

Where does this leave us?  I’m inclined to say that we are headed towards a period of general decline, probably no longer than the Great Depression itself was.  Commodity prices are already plummeting, leaving the petro-fascists out in the cold, along with most other ‘developing’ (3rd-world) countries that had depended on high commodity prices for economic growth.  In this sense, Iraq will probably jump to the fore once again, because it is of little doubt that the current spate of stability has little to do with the increased presence of US troops but $100/barrel oil prices.

Where, are we left?  It’s a question I’ve been having some trouble answering.  There exists some third variable and presence beyond investor fear and a burst housing bubble.  This is no correction.  It’s a massive redaction.

Interesting times, to be sure.

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Bailout politics.

This video is well worth watching.  Does anyone have a refutation?  If it’s true, this is a sad day to be a Democrat:

EDIT: refutation

on the “bailout”

The reactions to this week’s turmoil on Wall St. and the accompanying tumoult on Capital Hill have varied from “we must do this bailout…for the sake of the American Taxpayer”, to “We must not do this bailout, for the sake of the American taxpayer.”

The problem here is that there is a common perception that the $700 billion that the US government is going to pay will somehow go straight into the pockets of the evil bankers.  This isn’t true.  However, people have been right to react angrily to Paulson’s irrational demands of no oversight and regulation.  The fact that he has demanded $700 billion in one fell swoop, and has made it explicit he doesn’t even want court oversight of the buying up of this debt shows just how crazy the whole affair is (much less the people charged with fixing the damned thing).

In reality, this is all more or less a result of a decision made a long time ago to put the administration of our private property in the hands of people other than ourselves and other than simple savings and loan banks.  Putting investment banks into the mix, residential property became a speculative market.  That is, property became more valuable not because of demand but because of expected demand.  This results in the investment banks becoming the chief instigators of economic growth, because it is no longer growth in population or growth in manufacturing that causes land to increase in value, but instead the value that investment banks deem a piece of land to be worth.

Of course, as soon as the investment banks all stop trusting each other to value their assets accurately, property values plummet, and we find ourselves in a situation more or less like the one the US woke up to find itself in today.  And this is to say: The banks will need that $700 billion dollars, and will most likely get it.  The problem is, people will direct their rage at the banks, instead of at the Republicans, who bear the most responsibility of pushing the economy towards the unfettered market capitalism that caused this downfall in the first place.