Reads: This is not your grandfather’s depression…
Debtwatch No. 43: Declaring victory at half time – Steve Keen’s Debt Watch
Steve Keen, at DebtWatch, describes the debate so far on the next leg of the crisis – apparently some people in Washington have already begun to celebrate their victory, when the ball is still in play:
“Declaring victory at half-time” is a syndrome which afflicts the entire debate over our current economic situation: optimists are of the opinion that the crisis is all over now, while pessimists think it’s only just begun.
Keen thinks the optimists miss an important feature of the present crisis:
… [O]nce debt becomes a significant fraction of GDP, and its growth rate substantially exceeds that of GDP, the economy will suffer a recession even if the debt to GDP ratio merely stabilises.
A debt-dependent economy has no choice but to record rising levels of debt to GDP every year to avoid a recession. Unfortunately, this makes a debt-servicing crisis inevitable at some point, especially when a large fraction of the increase in debt is financing Ponzi-speculation on asset prices, since this adds to debt without increasing society’s capacity to finance that debt.
The “crisis” was set in motion by institutions lending each other non-existent money none of them can pay back. Consequently, the masses are once again expected to produce enough material value in the world to make the funny money real, and shore up the system one more time. To “raise the money” to do this will require generations of future productivity shoveled into the furnace of corporate capitalism’s banking machinery. There was nothing left to steal, so extorting the future was the only option left. Assuming the skimmers and the scammers manage to extract enough public monies to pump up corporations one more time, there will be another and bigger disaster not far down the road. We don’t need the Oracle of Delphi to predict this. Capitalism is unstable as hell, like an unbalanced dreidel that keeps tilting ever more wildly off center until it falls over or eventually hits the wall. We can now see the wall from here: Massive ecological collapse and species extinction. “Economic downturn,” even “crisis,” does not quite describe that approaching wall. All of America hopes we will miss that wall at least one more time.
An Extraordinary Coup? – Zero Hedge
I realize many of you will dismiss Mr. DeGraw’s writings as socialist banter, but I will add that as far as I am concerned, the real master coup revolves around pensions and mutual funds. Many people have no clue where their pensions are being invested, who is profiting off the misfortune of others and what a racket mutual funds are charging exorbitant fees for mediocre results.
There is a financial coup going on right now across the world and while it may have started in the United States, the debt disease is spreading across the globe at the speed of light. Where and how will this all end? Can capitalism survive if wealth is increasingly being concentrated in the hands of an economic elite that shows no sense of civic and moral duty to the societies they inhabit?
Karl Marx may be dead and his theories debunked, but I have a sick feeling in my gut that down the road, his dire prediction that capitalism is destined to self-destruct will ultimately be proven right.