The financial crisis which has roiled world financial markets since last year, has now boiled over into a political crisis. The revolt of the extremes against the middle consensus, we have asserted, is the opening salvo of an authentic 21st Century revolution against the existing order.
And, we are not alone in this view. According to one observer we found today:
[L]ast night’s vote was a Fort Sumter-esque shot in a modern class war. Macro Man has long thought the the negative aspects of globalization would eventually manifest themselves; however, he suspected that the primary mechanism would be protectionism. While there’s nothing to say that that still won’t be the case, he nevertheless views last night’s failed vote through the prism of Joe Sixpack desiring to claw back some living standard away from modern plutocrats.
Million of ordinary American families, suffering miserably under stagnant wages and income (as Wall Street and Washington gorged themselves on a rich diet of international credit inflows from China, Japan, Russia and the oil dependencies) have finally sunk beneath the waters of consumer debt.
It is important to remember this crisis is being driven by the saturation of the consumer market for debt – given their stagnant wages, working families cannot absorb more debt no matter how lavishly the credit markets of Wall Street are provisioned with cash by Washington bailouts.
Of course, we don’t have to tell you this if you are a typical working family carrying the average $9000 of credit card debt – on top of your home mortgage, and auto loan(s).
Only to Washington and Wall Street does this have to be explained.
Even for CNBC talking heads, who have shilled this bailout for about 15 hours a day, every day, this past week, the calamitous logic of onrushing events is finally seeping into their lizard consciousness:
Mark Haines: Ken (Goldstein, Senior Economist, The Conference Board), how can the consumer keep going? [They have] been financed by debt for years now, and you’re just not going to be able to do that anymore.
Ken Goldstein: Well, that’s a longer term situation, but right now that credit situation, especially with those credit spreads so wide, there is even the possibility companies won’t be able to get the money to make their payroll. That is how dire this [financial crisis] is.
MH: So, the consumer gets caught both ways? They’re not going to able to borrow, and they’re not going to get paid? This is really bad.
KG: This is about as bad as it gets.
Working families have seen their wages stagnate, and, their home equity shrink, or even go negative, as economic conditions worsen – leading to rising rates of home mortgage defaults and foreclosures.
The Washington ponzi scheme built on this shifting sand of class civil warfare – the likes of which has not been seen in modern American history – so clearly represents the unquestioned dominance of Wall Street over Main Street, that were it not for the glaring contradiction of its very constitution all would be lost.
The writer continues:
If the rationale for the TARP’s failure could be distilled in one chart, it would be the one below, which shows a surge in corporate profits (at the apparent expense of wages) as a share of national income. It is the divergent fortunes of these two series that has fueled Main Street anger and turned “no” voting Congressmen into class warriors.
Here above, in graphic form, is the engine of this particular revolution: the growing desperation of millions of working families who have watch their share of national income decline to dangerous and unsustainably low levels.
Equally to be noted, the slide of these same families into their present status as post-industrial era sharecroppers who find at the end of their day’s labor that they are deeper in debt than at the beginning:
The US savings rate [shown below] has been steadily declining since long before the invention of CDOs, SIVs, and subprime.
States the writer, this fall has to be reversed:
A large part of the rationale for government intervention in the current crisis is to ensure that this occurs in a gradual, orderly fashion, rather than abruptly via the wholesale withdrawal of credit throughout the economy.
Why suddenly the country is threatened with the “wholesale withdrawal of credit,” and, what that withdrawal means to you is the topic of our next section.
The world has yet to comprehend the significance of the events that unfolded today in Washington as a section of the Washington elite broke off from the Party of Washington, and the Party of Wall Street, and deserted to the side of working people.
We have just lived through the opening salvos of the first authentic revolution of the 21st Century.
It was indeed an odd mixture of political forces, representing the extreme right wing of the Republican Party, and the extreme left of the Democratic Party. One observer said it was as if the political spectrum bent back on itself, closing the gulf between the polar extremes of political life.
We, however, have been considering just this likelihood for about a year: that the rigid ideological strains of libertarian thought and the faded confused strains of 19th Century socialist thought had a natural affinity for each the other in their deep suspicion and hatred of the Washington establishment.
On the surface there is nothing of the two in common – the first, with its fetish for property, the second with it fetish for state management of economic life, appear as nothing if not completely incompatible.
Yet, in the era of the rule of the Moron, both have instinctively engaged in a common action opposing the lies, malfeasance, and war crimes of the Washington-Wall Street axis – especially as it has come to be expressed in this evil war – despite the gulf between them.
Clearly, such a common rejection as exploded in Congress today could not have happened without the utter lack of confidence of working Americans in the handling of this despicable adventure in Iraq by the Moron and Congress.
Moreover, these events would not have happened absent the complete rejection of Washington and Wall Street boiling up from Main Street, borne of the cruel tortures imposed on the latter in peace and in war and expressed in such daily indignities as simple as removing ones shoes to enter an airport, and as grave as burying loved ones under Defense Department imposed press blackouts.
The constant and insufferable invasion, humiliation, and harrassment of private individuals, combined with shameless military incompetence, profiteering and avarice in Iraq – both public and private – and topped by the administrative incompetence of Washington officials in the face of the destruction of the Gulf Coast, while the Moron partied with John McCain in Arizona, were dried tender set ablaze by the audacity of an president so without any sense of empathy as to ask the very individuals who had lost most under his rule to provide charity to those who had gorged themselves on his watch at public expense.
To ask the debtor to bail out his creditor – the perversity, the unvarnished gall, the very insanity implied by such a request is unequaled in modern political-economic history!!! It is, unquestioned, a breathtaking example of the sheer magnitude of the madness which has gripped Washington, and all who occupy it!
To be continued.
Those of us who are old enough will remember the time in the 1970s when decaying metropolis’s – Detroit, Cleveland, Newark – were abandoned by industry for the Sunbelt.
And, these dying cities were left in the hands of newly elected black mayors who took all the blame.
Yeah, a little like that.
The party of blue collar workers, the party who couldn’t stop out-sourcing, union breaking, and stagnant wages, the party who couldn’t end the war…
On its hands and knees begging the “Party of Wall Street” to help it bail out investment bankers!!!!!!
SHAME ON YOU DEMOCRATS!
So, we had time to kill watching this mess unfold on CNBC today. We stopped over to the Huffington Post to see if they had any news. While there, we posted this little note to tweak the noses of the, “Progressive,” wing of the Democratic Party:
Don’t you wonder how the Democrats get themselves into a position where they are holding the bag for a VERY unpopular president, to put together a VERY unpopular bailout, for the VERY wealthiest people in our country – all while the Republican Congressional delegation goes home to lead a peasant revolt against all four?
LOL…you can’t get this kind of entertainment out of Hollywood!
How gullible can you Democrats be??????????
That sparked this dialogue below with Mike169:
Mike169: As the Democrats made clear – they’re not holding the bag for anyone least of all these Republican morons. If this is as serious as they say then the Republicans (who are for fewer regulations and capital gains tax cut!) will be looking like the horses asses they really are.
Charley2u: Can you spell, O-C-T-O-B-E-R S-U-R-P-R-I-S-E?
I knew you could…bagholder.
Why do you think the administration came up with this a week before recess?
Let’s be clear here: this crisis began with stagnant incomes for working families over the past eight years. But, are your fearless leaders debating a bailout for them before going home to run for re-election?
Instead they are debating how to put together a package to bailout the debt factories of Wall St. The very people who have the Democrat constituency facing foreclosure and dispossession.
You people as a party are quite possibly the dumbest collection of losers every to accidentally cobble together a majority.
After you spend 700Bn to take care of the supporters of the GOP, what will be left to take care of your own???????
Mike169: Do you watch what is going on at all? When you figure this out please leave a message for me until then you’re living in a dream world. If this goes down and the country’s finances collapse (something you see as impossible) who will be the bad guys then. Also you have totally missed what the Democrats have said because like your fearless leader who knows nothing about economics by his own admission flew in to muddle everything up just in time for the October surprise which may well be the collapse of the Republican Party. Have a great day – I know I will!
Charley2u: I am so dissed about your answer!!!
You smack me down, and then support giving my hard earned money to the very people who own my mortgage and credit card debt!!!!!!!!!!!!!!!!!!!
What a damn insult!!!!
Have all you democrats lost your mind??????
Charley2u: Boy are you wrong!!!! I am just a poor slob trying to figure out when you Democrats will wake up and fight for people like me…
No wonder you can’t govern; you don’t even know who your friends are…SHEESH.
Mike169: Really! Is it your intention that the financial system collapse or is it that you think that the Bush administration is pulling everyone’s leg (he is your republican president you know). Did you see the biggest bank failure in American history just happened yesterday? Do you understand the position of the Republican opposition includes little or no regulation of those elements who have brought this mess before the public? In watching out for “the poor slob” do you think Republicans ever have? If so when I’d like to know? As far as this criisis goes, I’ll even agree with you – let it goe down the tubes. Let the banks suffer from their own stupidity but also suffering from their stupidity will be the rest of country. You may want to try and pick up an econimics book sometime if can read. Pathetic!
Charley2u: Yes. I think the administration is pulling our leg on this. Not, that there are no problem in the debt vreation sector of the economy – what you call the financial system – but that this would fix it.
This began with mortgage defaults – which means working folk did not have enough money to pay their bills. “Fixing the credit markets” – the aim of this legislation – will not correct the original problem.
People are being foreclosed and evicted because their income has not kept pace with the cost of living for at least the past eight years. They have been supplementing their wages and income with debt from Wall Street.
If you want to fix this problem, you have to address stagnant wages and income, not the availability of credit.
I don’t know how to say this more simply: I and my neighbors are up to our necks in debt, more credit will not fix this.
A package which brings us tax relief would. And, if you reduced military spending to pay for it, our neighbors in the international community might breathe easier as well.
Mike169: “I don’t know how to say this more simply: I and my neighbors are up to our necks in debt, more credit will not fix this.”
Let’s take this point right here. You have put yourself in debt beyond your ability to pay it off. The bailout the government is giving the financial institutions should also be used to bailout you? Is this what you’re saying? You may couch it in tax relief but it’s much the same thing isn’t it?
Charley2u: No. I am clear of all debt, because I know what the scam is here – and I pay attention
I was just using it as an example: I am saying this is basically the situation for most of Democratic party supporters.
In fact there have been about 20 foreclosures in my small town, however. A blue state.
Which is why I don’t understand why you are giving our tax money to the mortgage and credit card debt speculators.
But, I’ll just find an economics textbook and figure it out.
And, you Democrats can look at the polling data when my neighbors find out you are giving their hard earned dollars to Goldman Sachs…
Mike169: “Which is why I don’t understand why you are giving our tax money to the mortgage and credit card debt speculators.”
If this is what is being done I’d be pissed but it’s broader than that and if you cared you’d have looked at the proposal as redefined by the Democrats. By the way even prior to this particularly gigantic bailout. Republicans, not Democrats bailed out AIG, Fannie and Freddie, Bear Stearns all without the Democrats “help”. You’re on the wrong track by attacking the Democrats over this and if you think we didn’t get into this without the anti-regulation stances taken by John McCain you are sorely mistaken. I still haven’t heard your response to my question do you want the whole thing to come tumbling down or is there some middle ground that you can live with?
Charley2u: I began with the middle ground:
1. Bailout Main St, not Wall St.
2. Emphasize real goods, not military spending
3. Encourage exports, not the exchange rate of the dollar
To sum up, for the supporters of Barack Obama out there, this bail out must be stopped. No package should be voted up that does not have these principles:
1. Bailout Main Street first (income), not Wall St (credit).
2. Focus on the real economy first (real goods), not government spending (military).
3. Support the domestic economy first (exports), not the international economy (exchange rates).
From this, it follows, the main emphasis should be on working families and their circumstances. The least emphasis should be on the dollar, and attendant international financial interests (Wall St., Sovereign Wealth Funds’ assets, etc.)
You can’t go wrong if the proposals you support stick to these principles. Obama is having a problem offering a serious proposal on this precisely because he is not using this template.
Details are beginning to dribble out on how wrenching the changes will be for you in the next few months. Analysts on CNBC are frankly admitting rising unemployment through 2010 – at least 7 percent next year alone.
Govenor Patterson, of New York, indicates a slowing economy for at least 18 months, and perhaps for two years.
Hope you have your galoshes – shit will be deep, once you wake up to discover you have just transferred almost a trillion dollars to China. From Bloomberg:
“China is very worried about the safety of its assets,” he said. “If you want China to keep calm, you must ensure China that its assets are safe.”
Figures don’t lie, but liars figure – Mark Twain
The Moron returned to television last night bringing anguished tales of impending doom – news to all, apparently, but any person who has done the slightest bit of investigation into this crisis on the numerous web pages devoted to the subject.
The failure of Congress to hand him a blank check to bailout Wall Street, said the Marionette-in-Chief:
…would cause massive job losses, devastate retirement accounts and further erode housing values, as well as dry up loans for new homes and cars and college tuitions. These are risks that America cannot afford to take.
Of course, a simple back of the envelope calculation would have laid all this bare without the whining squeal of the Decider. The US needs several billion dollars each and every day to fund its pretensions to empire.
Above all, this requires the continuing inflows of currency from all the major holders of American dollars – China, in first place, but also Japan, Russia, and the oil dependencies in the Middle East.
These inflows rest on the assumption among the global holders of the American debt that their assets are safe, relatively liquid, and retain their value in the face of decaying global economic conditions.
The Empire is on life support, and you are being sacrificed. You are being asked to pony up untold billions of to guarantee the assets of the People’s Republic of China, who, through their mouthpiece, economist Yu Yongding, explicitly demanded action:
“If the US government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,” Yu said in e-mailed answers to Bloomberg. “If it is not the end of the world, it is the end of the current international financial system.”
As we noted at the time, not one of the leading members of the Party of Washington and the Party of Wall Street uttered a single response to this threat:
Not a word this week from a single member of the elite bosses of the Party of Washington. Not a peep from the economic vandals of the Party of Wall Street.
Not a single response from The Presidency, the office of the Speaker of the House, nor from the office of the Senate Majority Leader.
Not a word of this and its implication for you and those you love from the lips of the nominee of the Party of Washington, who waxed eloquent regarding how life will profoundly change under his enlightened term in office.
He went on for forty-two minutes, we are told, yet found not ten seconds of it where he could have told the nation, “Uh, sorry. The Chinese just sent us an ultimatum: Either we fix our economy, or we are cut off from the spigot.”
We also told you the implications of this threat:
There are only two choices here:
- Dismantle America’s Empire – withdraw from Iraq, Afghanistan, all overseas bases, pull back the fleets, recall the submarines, and stand down, or,
Last night, the Moron told you which of these choices Washington made.
Don’t cry for us, Argentina.
When it was your turn, back in 1999, we sure didn’t.